Indonesian bonds draw investors
Investors flooded Indonesia with orders for its 10-year sovereign bond, prompting the country yesterday to tighten the yield by 15 basis points.
Final pricing for the issue was set with a 6.85 per cent yield to maturity, or 277 points above the equivalent 10-year United States treasury, according to a market source.
The bond was set with a coupon of 6.75 per cent and issued at 99.285.
Earlier yesterday, the issue had been marketed with a yield of 6.85 to 6.9 per cent, down from 7 per cent on Monday.
According to the source, a total of US$4.2 billion in orders had been received, and Indonesia decided it would raise $1 billion.
Another source said less than 10 per cent of the deal would be allocated to Indonesian investors.
Ben Yuen, the head of Asian fixed-income at First State Investments, expected the yield would tighten by a further 10 basis points once the issue started trading in the secondary market.
The fixed-income credit research team at HSBC said Standard & Poor's and Moody's Investors Service could upgrade Indonesia again this year.
The two credit rating agencies upgraded the country by one notch to B and B2 respectively in the middle of last year.
HSBC said the country's stabilising politics would support a stronger fiscal position, firmer currency and reduced external vulnerability.
Indonesia's only outstanding sovereign was issued in 1996. The 10-year 7.75 per cent sovereign was trading at 7.147 per cent yesterday, or 231 basis points above the US treasury, according to Bloomberg.
JP Morgan and Deutsche Bank were arranging the deal.
