Govt to Offer Shariah Bonds Worth $87m to Investors

Indonesia plans to sell Rp 1 trillion rupiah ($87 million) in shariah-compliant bonds next week, as part of the country’s efforts to raise funds to reduce its budget deficit.

The upcoming issue of rupiah-denominated Islamic bonds are classified as “project-based sukuk ,” the Finance Ministry said in a statement published on its website on Thursday.

It is hoped that the issue will help boost the number of foreign investors holding the country’s notes. Overseas holdings of Indonesian T-bills have declined in recent months amid massive sell-offs of the country’s assets.
 
Indonesia raised Rp 12 trillion from the sale of rupiah-denominated Treasury bonds and bills on Tuesday.

The government received a total of Rp 27.78 trillion in incoming bids for the notes, 2.3 times the amount on offer.

Bond analysts in Jakarta said such high bids reflect a strong appetite among investors for the country’s notes.

Foreign investors, who have unloaded their assets on Indonesian markets since June, are beginning to start to accumulating the country’s assets once again.

Foreign holdings of the country’s bonds have risen to Rp 289.24 trillion as of Wednesday from Rp 284.01 trillion at the end of August, according to data from the Finance Ministry. That is a decrease from a high record of Rp 302.9 trillion at the end of May.

Foreign holdings have been falling since June after the US Federal Reserve hinted at tapering its quantitative easing policy.

“The yields are quite high, so this presents an opportunity to buy. In addition, expectations of inflationary pressures going forward will ease,” Bank Danamon bond strategist Dian Ayu Yustina was quoted by Reuters as saying in Jakarta on Thursday.

The government also plans to sell bonds to retail investors on Oct. 7, the government said in a separate statement on Monday.

Individual investors must bid a minimum of Rp 5 million and a maximum of Rp 3 billion, according to Finance Ministry guidelines.

The government has been selling rupiah and dollar-denominated bonds to help reduce its budget deficit, which is estimated to reach 2.38 percent of gross domestic product this year.