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14 Sept 2021

Indonesia; the First Asian Nation to Buy Back Global Bonds after raising $1.84B

The Index Today

According to documents and a statement from the government, Indonesia has managed to raise $1.84 through selling bonds denominated in euros and U.S dollars. A portion of the sales revenue will be used to buy back outstanding US dollar bonds.

This move is the first ever in the region to take place for dollar bonds through which liquidity may be managed before the U.S tapering begins.

Term sheets show that Indonesia has sold 10-year bonds for a total of $600 million which carry 2.18% yield. Side by side, 40-year bonds worth $625 million carry a yield of 3.28%. The proceeds will later be used to finance a tender offer that continues until Friday for eight existing bonds maturing between 20222 and 2026.

According to analyst Handy Yunianto, the buyback offer is an effort to reprofile debts and minimize refinancing risks with tenor bonds that lock at a now relatively low yield. The prices being offered are lower than market prices.

Indonesia has already raised 500 million euros in its first ever sale of euro-denominated bonds. These funds will be allocated to sustainable development goals and efforts. The euro bonds have a 12 year maturity and carry a 1.352% yield. These rank as the regions first SDG bonds and gain higher interest rates from investors.

The 10-year dollar bond order book is worth $2 billion whereas the 40-year orders are worth $1.2 billion. Indonesia’s fiscal deficit has increased in 202 due to the covid pandemic. The central bank is working to buy bonds directly from the government to help reduce the growing interest expenses in the coming years.

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