Indonesia kicks off Asia’s sovereign issuance in 2020

Strong rally in US interest rates and credit spreads allows sovereign to achieve lowest pricing across US and euro funding markets

The Republic of Indonesia (RoI) became the first sovereign in Asia to access the G3 bond market in 2020 when it priced on January 8 a dual-currency offering as it capitalized on strong investor demand in the new year.

The SEC-registered global notes comprised a 10-year bond amounting to US$1.2 billion, which was priced to yield 2.88% and a coupon of 2.85%. This was the lowest spread and yield ever achieved by the sovereign in the US dollar market. The yield represented a 24.5bp compression from the initial price guidance of 3.125% area.

The other US dollar tranche was for 30 years and amounted to US$800 million, which was priced to yield 3.55% and a coupon of 3.50%. The coupon was well inside the 3.70% that the RoI achieved when it previously arranged a 30-year deal in October 2019. The yield was also tighter by 20bp from the initial price range of 3.75% area.

The new US dollar bonds represented the sovereign’s fifth SEC-registered shelf issuance in this market, demonstrating its continued commitment to enhance the secondary liquidity pool of its tradeable securities available to US and global investors.

The other offering was for seven years and amounted to one billion euros (US$1.11 billion), which was priced to yield 0.953% and a coupon of 0.90%. These were likewise the lowest spread and yield ever achieved by the RoI in the euro bond market. The final pricing implied the sovereign was able to realize a price compression of 27bp – well inside the initial price guidance of 130bp over mid-swap – on the back of strong demand from European accounts.

The RoI executed the transaction in a swift and opportunistic manner, taking advantage of the positive investor sentiments and stable financial market conditions at the start of the year. With the strong rally in the US interest rates and credit spreads after the US-China phase one trade deal announcement in December, the sovereign was able to achieve the lowest pricing across both the US dollar and euro funding markets.

The RoI previously tapped both the US dollar and euro bond markets in October last year, printing a 30-year US$1 billion offering and a 12-year one-billion-euro deal.

Proceeds from the bonds will be used for general budgetary purposes, including for financing requirements. Citi, Deutsche Bank, Goldman Sachs, Mandiri Securities and Societe Generale were the joint bookrunners for the transaction, while Danareksa Sekuritas and Trimegah Sekuritas Indonesia acted as co-managers. 

Date

10 Jan 2020

Channel

Capital Markets

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