The Government of Indonesia sold dual-currency bonds US$2.1 billion, said the official today (10/25) - Photo by Finance Ministry Office

JAKARTA (TheInsiderStories) – The Government of Indonesia sold dual-currency bonds US$2.1 billion, said the official today (10/25). In US Dollar’ denominated (RI1049) the values $1 billion with 30-years tenure and in Euro-denominated (RIWUE1031) worth of EUR1 billion ($1.11 billion) with tenure 12 years.

The US Dollar bond have coupon 3.70 percent with yield 3.75 percent, while the Eurobond has yield 1.412 percent and coupon rate 1.400 percent. This bonds received ratings Baa2 from Moody’s Investor Services, BBB by Standard & Poor’s, and BBB by Fitch.

According to director general at finance ministry Luky Affirman revealed, the dual-currency bond issuance is carried out at the right moment to take advantage of the financial market conditions were relatively stable, maintaining adequate liquidity in the country, as well as a positive response on the implementation of the inauguration of the president and the establishment of cabinet for the period 2019 – 2024.

In addition, he said, this issuance was intended to anticipate the potential widening of the 2019 State budget deficit is estimated in the range of 2.0 – 2.2 percent, as the implementation of counter-cyclical policy to respond to domestic and global economic conditions, while maintaining the performance of the reception and quality of spending.

For the issuance of US Dollar Bonds, the final price guidance tightened up 35 basis points (bps) from the initial price guidance. As for Euro happen tightening up 30 bps from the initial price guidance. This tightening over the yield level and the issuance of Euro Bonds and US Dollar Bonds is lower than the fair value of the yield of the bonds issuance for each 6 bps.

The second dual-currency bonds will be listed on the Singapore Stock Exchange and the Frankfurt Stock Exchange. Joint Book-runners in this transaction are BNP Paribas, Citigroup, Goldman Sachs, Mandiri Securities, and Standard Chartered Bank. While, acting as co-managers are PT Danareksa Sekuritas and PT Trimegah Sekuritas Indonesia Tbk (IDX: TRIM).

Indonesian government plannned to issue government bond around Rp825.70 trillion ($58.98 billion) in 2019. This figure is lower than the amount in 2018 State Budget of Rp885.69 trillion.

The decline is in line with the government planned to lowering the amount of the debt in 2019. Based on the official statement, the net issuance in 2019 is predicted worth of Rp359.25 trillion, down from the figure in the 2018 State Budget of Rp399.18 trillion.

For the deficit financing, in 2019, Indonesia will also receive loan assistance from several multilateral partner institutions, such as the World Bank, the Asian Development Bank, which is intended for the development of natural disaster affected areas in Lombok and Central Sulawesi.

The government also continues to find innovative ways of the financing through the issuance of retail bond with online formats or other creative financing models. Issuance of online retail bond is conducted with the consideration of increasing domestic investor participation, in line with the strategy to reducing foreign ownership and foreign currency debt.

Further innovations by the government include providing special access for micro-finance institutions and, Small and Medium Enterprises, philanthropic institutions including waqf fund management through Waqf Linked Sukuk instruments. The government also plans to continue publish Green Sukuk.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com