Indonesia raised $2.65 billion from the sale of dollar bonds, with its newfangled popularity among investors helping it offset the global rise in borrowing costs.
(Bloomberg) — Indonesia raised $2.65 billion from the sale of dollar bonds, with its newfangled popularity among investors helping it offset the global rise in borrowing costs.
The new offering’s five-year tranche priced to yield 4.4%, matching the five-year extrapolated yield for the sovereign’s existing dollar notes, according to data analyzed by Bloomberg. The ten-year maturity also fell in line with the market.
Helped by their commodities exposure, Indonesian assets have emerged as a haven this year, with the equity market up nearly 10%. Spreads on the country’s US-currency debt narrowed the most in more than two years in August.
But the 30-year portion of the debt, which Fitch rates BBB, priced more than 20 basis points outside the curve, indicating the government had to pay extra.
The offering by Southeast Asia’s largest economy was part of deluge of bond deals around the world this week, with US companies offering the largest amount of bonds in a year on Tuesday and the Asian primary market marking its busiest day since June.
While a strong dollar and rising interest rates have crimped dollar bond sales across the region this year, with only one company in Indonesia — Southeast Asia’s largest economy — issuing US-currency debt.
But issuers across Asia returned to the market this week, taking advantage of a drop in spreads, to lock in funding before the Federeal Reserve’s next meeting, at which officials are expected to raise interest rates again.
The deal could “kick off dollar fundraising from state-owned enterprises as they act to manage liabilities and secure liquidity,” Bloomberg Intelligence analysts Mary Ellen Olson and Sheenu Gupta, wrote in report. That may create “a near-term drag on spread performance.”
Proceeds of the bond sale will be used to repurchase outstanding debt as well as for government expenditure, which has risen due to higher energy subsidies.
President Joko Widodo decision to ease pressure on the state budget by raising fuel prices by more than 30% was met by public protests this week, including in Jakarta.
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