Indonesia plans to swap debt on Tuesday
Indonesia plans to swap short-term rupiah-denominated bonds with paper due 2027, part of efforts to ease refinancing risks, the treasury director general at the finance ministry said on Friday.
The debt swap followed strong demand for 20-year bonds in an auction this week — amid expectations of lower interest rates — allowing 20-year bond yields to fall to 10.498 percent from 13.50 percent in a previous auction of 20-year debt last June. “The government plans to swap debt maturing between 2008 to 2012 with paper maturing 2027 on Tuesday next week,” Rahmat Waluyanto told reporters.
Indonesia’s last bond swap was on Jan. 9 when it exchanged 1.562 trillion rupiah ($172.7 million) worth of rupiah government bonds maturing between 2007-2011 with paper maturing in 2025.
There has been strong demand for long-dated bonds in recent months due to expectations of lower interest rates.
The benchmark one-month interest rate, also known as the BI rate , is down to 9.50 percent from a record high 12.75 percent as the impact of a sharp fuel price increase in October 2005 fades.
Analysts polled by Reuters earlier this month forecast the benchmark rate would fall to 8.5 percent at the end of 2007.
Ratings agencies, however, still rate Indonesian bonds below investment grade, or as junk bonds. Standard & Poor’s Ratings Services, for example, rates long-term Indonesian local currency government debt “BB+” — one notch below investment grade. ($1=9,045 rupiah)
Reuters