Indonesia is marketing 10- and 30- year dollar bonds today, tapping the global market for the first time this year, a person familiar with the matter said. The nation is offering notes due April 2023 to yield about 3.55 percent, 183 basis points more than similar-maturity Treasuries, according to the person, who asked not to be identified as the terms aren’t set. It is also marketing debt maturing in 2043 at around 4.80 percent, 192 basis points higher than the U.S. securities. Indonesia plans to cut the proportion of bonds sold in foreign currencies to 14 percent in 2013, from 21 percent last year, Robert Pakpahan, director general at the debt management office in Jakarta, said Feb. 6. A 5.9 percent drop in the rupiah against the dollar in 2012 boosted debt servicing costs to 982 billion rupiah ($101 million), according to Bloomberg estimates based on finance ministry data. The average dollar debt yield for Asian borrowers was 3.52 percent, near October’s record low of 3.35 percent, an HSBC Holdings Plc index shows. “This year is the right time to issue global bonds before global yields begin to rise in the coming years,� Herdi Wibowo, head of debt capital markets at PT BCA Sekuritas, a unit of the nation’s largest lender by market value, said before the offer. “The government is taking the opportunity to sell as soon as possible due to prospects for a recovery in the U.S., which will prompt global inflation to start picking up.� PT Danareksa Sekuritas, JPMorgan Chase & Co., Deutsche Bank AG, Standard Chartered Plc and PT Mandiri Sekuritas are assisting with the sale. Default Swaps Indonesia plans to tap the international market again in the second half of the year, Loto Srianita Ginting, director of government securities at the debt management office, said on April 3. The government sold dollar debt three times last year, with the most recent a November offer of $1 billion of 10-year Islamic notes with a coupon of 3.3 percent. The yield on the securities has since climbed four basis points to 3.34 percent, data compiled by Bloomberg show. The extra yield investors demand to hold Indonesia’s dollar notes rather than similar-maturity Treasuries widened 51 basis points this year to 230, the biggest premium since August, according to JPMorgan Chase & Co.’s EMBI Global Index. The cost of insuring Indonesian debt using five-year credit-default swaps fell six basis points to 158 basis points last week, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. Good Timing The Bank of Japan (8301) will double its monetary base by the end of 2014 by buying government bonds, it said on April 5, in the nation’s largest round of quantitative easing. “The government is offering quite high yields to make sure its first sale is a success, which will set the trend for the rest of the year,� said Ezra Nazula, the Jakarta-based head of fixed income at PT Manulife Asset Management Indonesia, which oversees 25 trillion rupiah of debt. “The timing is good, with all things considered, right after the recent announcement for monetary easing by Japan.� Moody’s Investors Service and Fitch Ratings assigned the bonds their lowest investment grade rankings, according to statements today. Standard & Poor’s rated the benchmark issuance, part of a $20 billion program, at the highest junk level, it said in a note today. A sale of $500 million or more is considered a benchmark offer. Fuel Subsidies Fitch and Moody’s restored Indonesia to investment grade more than a year ago. S&P has refrained from following them, saying last April the country was at risk from “policy slippages� such as its failure to cut fuel subsidies. The government is still looking at ways to trim the fuel- subsidy bill. It is considering measures to limit usage, while not ruling out price increases, Finance Minister Agus Martowardojo said in March. Indonesia’s dollar-denominated debt has returned 7.9 percent in the past year, the fourth-worst performance among 11 Asian economies tracked by HSBC Holdings Plc indexes. South Korea, Malaysia and Singapore delivered lower returns, while Pakistan’s 21 percent gain was the best performance. To contact the reporters on this story: Yudith Ho in Jakarta at yho35@bloomberg.net; Tanya Angerer in Singapore at tangerer@bloomberg.net To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

Source