Indonesia has just sold $3b in dollar bond

Aditya Suharmoko and Mustaqim Adamrah , The Jakarta Post

Indonesia has just sold US$3 billion in medium-term notes, the country’s largest ever dollar-denominated bond sale, to help plug the growing state budget deficit.

The Southeast Asia’s largest economy has sold $2 billion of 10-year bonds, with a yield of 11.75 percent, and $1 billion of five-year bonds, with a yield of 10.5 percent, according to a Finance Ministry statement Friday.

The yields of 10-year notes and five-year notes are 8.759 percentage points and 8.474 points respectively, higher than similar-maturity US Treasuries, Bloomberg reported.

Anggito Abimanyu, the ministry’s head of fiscal policy, said the bonds would help cover the budget deficit of Rp 139.5 trillion, equal to 2.5 percent of gross domestic product (GDP), and increase forex reserves.

“Our trade surplus has declined;, while there has been a capital outflow from our investment portfolio. The source from where we can maintain our forex reserves is foreign debts,” said Anggito.

He added the yields were within the government’s “benchmark”.

Finance Ministry director general of debt management Rahmat Waluyanto said the yields rose due to a “repricing of risk” as the perception of global economic risks rose.

“Yields rise not only for Indonesia’s bonds; but also Brazil’s, between 300 basis points and 400 basis points,” he said.

He added the government decided to go on with the sale to plug the deficit and to develop market confidence in Indonesia’s bonds.

“We are maintaining investors’ confidence. They have a high enthusiasm, we don’t want to disappoint them.”

The notes triggered total orders of $7.25 billion from 200 investors.

Anggito said the government initially wanted to sell between $1.5 billion and $2 billion of bonds, but decided to sell $3 billion as the market situation would likely become worse later this year, thus increasing bond yields.

The bonds are expected to be settled within a week, increasing Indonesia’s forex reserves, which stood at $50.87 billion as of January.

The government also plans to issue dollar sukuk (Islamic bonds). No details have been announced yet.

“For a while, we won’t issue global bonds anymore. But in our pipeline, there are global sukuk, samurai bonds and drawdown options, which we can use,” said Rahmat.

“The global medium-term notes were issued at the right time. Samurai bonds will be issued in June, considering those need preparation for the first issuance,” he added.

In the 2009 budget, the gross amount allocated to issue of bonds is Rp 99.7 trillion — but the government should look for another Rp 44.5 trillion in loans after the budget was adjusted earlier this week to accommodate extra efforts to shield the economy from the global crisis.
Under the budget adjustment, the government will allocate Rp 73.3 trillion to the stimulus package.

Rahmat said the government had so far issued Rp 56 trillion in bonds.

Bank Indonesia (BI) governor Boediono said the bonds would add to the central bank’s forex reserves, increasing the amount of dollars available to strengthen the rupiah.

“The bilateral swaps and government borrowings will strengthen our ammunition,” he said.

Separately, economist-turned-lawmaker Dradjad H. Wibowo said the bond yields were too high.
The Philippines recently sold $1.5 billion of 10-year notes with a 8.5 percent yield, Bloomberg reported, 3.25 percent lower than Indonesia’s 10-year bonds.

“When the global market is bearish, the government shouldn’t have insisted to issue global medium-term notes,” said Dradjad.

Iraqis Vote, Hope for Better Future

By Afif Sarhan, IOL Correspondent

BAGHDAD — Amid tight security, millions of Iraqis went to polling stations on Saturday, January 31, in the country's provincial elections they hope to bring peace and security to the war-torn country.

"It is a pleasure to be here today on a shared democracy," Hassan Fawad, 26, told IslamOnline.net as he cast ballot in Yarmouk district polling station in Baghdad.

"Since I was kid I never understood the real meaning of this world but today it was clear to me.

"It is our chance to have our voice inside the government by electing someone we know or had the chance to hear their proposals."

About 15 million people are eligible to cast ballots to elect 440 councilors from among more than 14,400 candidates in 14 of Iraq's 18 provinces.

Polling closes at 5 pm (1400 GMT), with results expected to start rolling in on Tuesday.

In Sadr city, the major Shiite suburb in Iraq, voters did not hide their preference to cast ballot to candidates backed by Shiite leader Muqtada al-Sadr.

In southern Iraq, a huge preference was seen between the influential Islamic Supreme Council of Iraq and a coalition headed by Prime Minister Nouri Al-Maliki's Dawa Party.

"The democracy is everywhere in Iraq today," said Lt. Dirar Muhammad.

"Any person that eligible to vote, despite his actual profession or living condition, had a chance to chose their candidates.

"Security is guaranteed in all poling stations and people are leaving after voting with the sureness of safety never seen in their eyes before."

Iraqi authorities have sealed borders, shut down airports and imposed transport bans and night-time curfews as part of a massive security lockdown for the polls.

The provincial elections are part of a US-backed plan to reconcile rival groups, particularly Sunni Arabs, who boycotted the last round in 2005.

The poll results are also expected to set the national mood before the general elections, scheduled later in the year.

Jubilant Iraqis

Many voters hope that the provincial election will bring their country up from years of sectarian strife and strengthen its fledgling democracy.

"Four years ago we stayed in our home scared that on our way to the station we could be killed," Kassim Abid, 52, said as he cast ballot in a Baghdad polling station.

"But today I woke up in early morning, made my pray thanking God for the opportunity and went with my family to give our participation on our country's future.

"I never felt so good. The sensation of democracy could be touched and after years of imposed government, we could today choose the ones we thrust to represent us.

"I know it is a temporary illusion but it is nice to feel that Iraq is moving forward and not backwards.

Six policemen and a civilian were injured Saturday in a bombing in the mainly Shiite Turkmen town of Tuz Khurmatu north of Baghdad.

Four flash bombs also exploded near several polling centers in the Sunni Arab town of Tikrit, the hometown of former president Saddam Hussein, with no casualties.

But this did not discourage Iraqis from casting their ballot.

"Voters are showing pleasure in having their fingers stained with the blue-violet ink, while four years ago it was enough reason for people fear their lives," said Ahmed Moussa, a political analyst who was at one of Adhamiyah district's polling station.

"When you look at the polling stations voters, you find out the huge variety of gender, age, professions and sect. Soldiers, prisoners, housewives, teachers, students, all together in the same place looking for the same aim that is elect their representatives."

Voters were also expected to turn out in large numbers in areas where Sunnis largely boycotted the 2005 national elections.

"As much as Sunnis participate in this election, more probable of stability is expected in Iraq," said Samir Farhan, 41, father of two and resident of Ramadi, west of Baghdad.

"Many fighter groups have understood the importance of this elections for the country's future.

"I believe that it isn't only that security is high in everyplace because it never was an excuse for resistance groups, but they also expect changes and are aware that a fair and clear election is the best way to show American troops that their time in this land is over."

Source : IslamOnline.net