www.reuters.com - Feb 7 (Reuters) - Indonesia saw strong demand and weaker yields for its debt on Tuesday as last month's upgrade to investment status continued to spur investor buying and robust 2011 GDP growth figures underscored the economy's resilience.
Investors snapped up 12 trillion rupiah ($1.34 billion) in a debt auction on Tuesday, above a 8 trillion rupiah target, the debt office said. Incoming bids were 42.38 trillion rupiah , lower than 50.13 trillion rupiah seen in an auction on Jan. 26, but still much higher than previous bids. (source)
Southeast Asia's largest economy grew by 6.5 percent last year, the fastest pace since 1996, as investment soared and domestic consumption stayed strong, evidence of the economy's strength in the face of the euro debt crisis.
Foreign appetite for Indonesian bonds will likely continue given that Standard & Poor's ratings agency will likely follow Moody's and Fitch and upgrade Indonesia and the possibility that the central bank will cut rates further this year.
"Now that Indonesia has been classified as investment grade by two ratings agencies more portfolio managers are able to access this market. We believe there is scope for a further rally," said Pin Ru Tan, an analyst at HSBC in Hong Kong.
Investors on Tuesday mostly bought Indonesian 15-year and 30-year bonds and yields fell across the curve from the Jan. 26 auction. For table see:
Indonesian government bond prices have soared since the upgrade by Moody's in January and the yield on the benchmark 10-year bonds has fallen around 80 basis points .
Since the upgrade, foreign investors have resumed buying Indonesian bonds, raising their ownership to 32 percent as of Feb. 3 from 30.8 percent at the end of 2011, according to the latest debt office data.
The investment status will allow more risk-averse investors to put money in Indonesia, already among the favourites for funds such as Franklin Templeton, a unit of U.S. money manager Franklin Resources Inc.
Debt office chief Rahmat Waluyanto said on Monday the country planned to issue yen-denominated samurai bonds in June and global sukuk in the second half of this year, after it sold $1.75 billion of 30-year sovereign dollar bonds in January.
Indonesia has raised 33.83 trillion rupiah in debt auctions so far this year out of a total target of 53.2 trillion rupiah this quarter.
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