INDONESIA sold 40-year local-currency bonds for the first time as looming interest-rate cuts boost the allure of longer-tenor debt.
The government raised three trillion rupiah (S$252 million) from the sale of debt papers due 2064 through a private placement, Finance Ministry Director Deni Ridwan said on Tuesday (Aug 27). The note, which is a record maturity for a rupiah-denominated issue, carries an annual coupon of 6.875 per cent.
Indonesia plans to offer the series through a regular auction, with timing depending on market conditions and investor appetite, Ridwan said. The longer maturity should help meet demand from pension funds and insurers for long-term investments and deepen the domestic financial markets, according to the statement.
As global central banks telegraph rate cuts are on the horizon, longer-tenor debt becomes particularly attractive for investors who want to lock in higher premiums. Bank Indonesia signalled at its meeting this month that it could start lowering borrowing costs by the fourth quarter from the multi-year high of 6.25 per cent.
“If it is offered through an auction, the demand will likely be decent, especially from pension and insurance funds,” said Handy Yunianto, a fixed-income analyst at Mandiri Sekuritas in Jakarta. “With the expectation that interest rates will fall going forward, foreign demand for long-duration notes will also increase, as long as our currency risk continues to improve.” BLOOMBERG
