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JAKARTA. Economic improvements have spelled a positive for the latest auction of government debt papers (SUN), generating higher proceeds than initially targeted.
According to the Finance Ministry’s financing and risk management office (DJPPR), it managed to raise up to Rp 10 trillion (US$733.89 million) from a SUN auction that was held on Tuesday.
The auction saw the government sell five series of debt papers, consisting of SPN12160708, FR0053, FR0056, FR0073 and FR0067. They will mature in 2016, 2021, 2026, 2031 and 2044, respectively.
The total incoming bids recorded by the DJPPR stood at Rp 12.66 trillion, almost double the indicative target that was set at Rp 7 trillion.
The result of the Tuesday auction was higher compared to the previous SUN auction that generated Rp 9 trillion on Oct. 13. With the latest figure, the government has so far realized 97.89 percent of the gross issuance target set at Rp 461.7 trillion.
“That is assuming that the budget deficit will stand at 2.23 percent,” said Loto Srinaita Ginting, the director of government bonds at the DJPPR.
“Incoming bids from foreign investors were equal to 48.6 percent of total incoming bids of Rp 12.66 trillion,” she added.
Manulife Asset Management fixed income head Ezra Nazula Ridha said that economic improvements had led to the positive outcome in the latest bond auction, namely the lower yield.
“Bond yields have come down considerably, from 9.5 percent [in September] to 8.5 percent. So around 100 bps [basis points],” he said.
Ezra said that it was normal for some profit-taking to take place, but added that overall, macroeconomic conditions had definitely improved. “Inflation is on target and currency [the rupiah] has stabilized below 14,000 [per US dollar].”
Latest data from the Central Statistics Agency (BPS) showed that the year-to-date inflation rate stood at 2.2 percent, while the year-on-year rate reached 5.1 percent by the end of September.
The year-to-date figure was well within this year’s outlook set by the government at 5 percent and by Bank Indonesia (BI) at between 3 percent and 5 percent.
The rupiah, meanwhile, had begun to trade below 14,000 against the greenback since Oct. 7, data from Bloomberg showed. As of Tuesday, it ended at 13,623 per US dollar, strengthening by 0.2 percent from the previous day.
Trimegah Securities fixed income analyst Dini Agmivia Anggraeni also acknowledged that positive economic data had played a role in the robust incoming bids.
She added that the government was close to realizing its full-year target and that prompted investors to enter the bond market by buying the SUN.
“With less than Rp 10 trillion left targeted, investors thought that it was best to purchase the debt papers now. So the demand was higher than the supply.”
According to Dini, lingering uncertainty over a key interest rate increase by the US Federal Reserve has driven investors to set their sights on emerging markets again, including Indonesia. (Tassia Sipahutar)
