JAKARTA (TheInsiderStories) – Indonesia has raised US$1 billion and one billion Euro ($1.24 billion) in a dual-currency bond sale, the finance ministry said in statement on Friday (20/04).
The Euro denominated 7-year tranche due April 24, 2025 was priced at a coupon of 1.750 percent–the lowest coupon in the Euro market till date–yielding of 115 basis points over the 7-year mid swap rate or 1.780 percent.
The Euro 7-year notes marks the republic’s fifth issuance in the Euro Market and its first U. S SEC-registered Euro Issuance.
While, the U.S dollar denominated 10-year tranche due April 24, 2028 was priced at a coupon of 4.100 percent and a yield of 4.130 percent from initial price guidance 4.400 percent.
The issuance also marks the country’s second dual currency transaction, following previous one in July, 2017. At that year, government has successfully raised 100 billion yen from the Samurai bonds sale and 1 billion Euro from the Euro bonds.
Last week, Moody’s has upgraded Indonesia’s sovereign credit ratings to a notch above its lowest investment grade, parallel to the rating given by fitch for Indonesia in January. S&P still rates Indonesia at the bottom of its investment grade.
The bonds are rated Baa2 by Moody’s, BBB- by Standard & Poor’s and BBB by Fitch. The notes will settle on April, 2018 and will be listed on the Singapore Stock Exchange and Frankfurt Stock Exchange.
Credit Agricole CIB, Deutsche Bank, Goldman Sachs, HSBC and local hous PT Mandiri Securities acted as Joint Bookrunners for the transaction, while PT Bahana Sekuritas, PT Danareksa Sekuritas and PT Trimegah Sekuritas Indonesia Tbk (IDX: TRIM) acted as Co-Managers.
So far, Indonesia has raised Rp846.4 trillion (US$61.78 billion) from selling the government bonds, where 80 percent of them in local currency denomination. Proceeds from the bond sale will be used to help plug budget deficit.
The country’s deficit stood at 2.48 percent of Gross Domestic Product (GDP) in 2017. This year, the government aims to reduce the deficit to 2.2 percent of GDP, partly supported by a planned 20 percent increase in tax revenue.
Analysts have said that a potential risk for Indonesia is the ratio of domestically issued government bonds held by non-residents is high at around 40 percent. A big chunk of bonds in foreign hands, means there is a risk of sudden outflows in times of global economic turmoil.