Government will issue non-guaranteed Samurai Bond

JAKARTA. The government is confident to seek funding from abroad amid the national economic recovery optimism. The government intends to issue yen-denominated global bonds aka samurai bonds with two schemes, namely underwriting (guaranteed) and non-guaranteed.

At the previous issuance, the government always carries guaranteed scheme with Japan Bank for International Cooperation (JBIC) as guarantor. One of the conditions of investment in Japan does require JBIC to be a guarantor if Indonesia had failed to pay.

Director of Government Securities in the Directorate General of Debt Management (DJPU) Ministry of Finance Loto Srinaita Ginting stated, so far, the government plans to issue samurai bonds in 2015 with two schemes, namely the JBIC-guaranteed and non-guaranteed schemes. "These two schemes are to diversify financing instruments and broaden the base of the global investor network," he said last week.

Unfortunately, he could not disclose the value of the emission, coupons and time of issuance of samurai bonds because they are still studying it. DJPU previously stated, the government speeding global bond issuance in the first half of 2015 around Rp 86.2 trillion or 20% of the target issuance of government securities (SBN) in 2015 state budget (APBN). The last time Indonesia issued a samurai bond in 2012 amounting to ¥ 60 billion with coupons 1.13%.

BNI Securities Fixed Income Analyst I Made Adi Saputra saud, publishing these two schemes show the government is confident. "The government is assessing whether the debt securities desirable though not guaranteed. On the other hand, the government wants to take advantage of the stimulus the Bank of Japan (BoJ)," said Made.

Indonesia also have a low level of risk, as evidenced by 10-year credit default swaps. The smaller the CDS, the minimal investment risk of a countries.
According to Made, non-guaranteed issuance will demand a higher coupon than the version guaranteed. Thus, the cost of funds will be higher than the issuance of samurai bonds emissions before.

Global Markets Financial Analyst Manager of Bank Internasional Indonesia estimates, emissions composition guaranteed and non-guaranteed possibilities around 70:30. Meanwhile, the value of emissions might be between ¥ 60 billion to ¥ 100 billion.

Kumar predicts, non-guaranteed bond coupon will be 50-100 basis points higher than the samurai bonds guaranteed. Meanwhile, guaranteed samurai bond coupon about 0.7% -1%. "This refers to the level of the 2012 samurai bond yields are now at 0.86% and Japan's 10-year bond yields are around 0.41%," he explained.

Kumar reminded that a number of factors can affect the coupon samurai bonds in 2015. For example, the potential decline in Japanese bond yields due to the effects of the BoJ stimulus, the Fed rate hikes, and the economic outlook of Indonesia.