Bloomberg News

Indonesia Sells 60 Billion Yen Bonds in Japan for Third Samurai

November 06, 2012

Indonesia sold 60 billion yen ($748 million) of 10-year Samurai bonds, its third such issue in the Japanese fixed-income market since the start of 2009.

The notes, guaranteed by Japan Bank for International Cooperation, were sold with a 1.13 percent coupon, according to an e-mailed statement from SMBC Nikko Securities Inc., one of two arrangers. That was a premium of 30 basis points over yen swaps, Robert Pakpahan, acting director general of the debt management office, said in a text message today. Poland, whose credit rating is four steps higher than Indonesia’s at Moody’s Investors Service, paid 67 basis points more than the yen swap in a sale of five-year Samurai bonds on Nov. 2.

Japan’s benchmark interest rate is near-zero compared with 5.75 percent in Indonesia, which is spurring demand for higher- yielding assets. The Southeast Asian nation was returned to investment grade by Moody’s this year and Fitch Ratings in late 2011. The $847 billion economy expanded more than 6 percent for an eighth quarter in the period through September, the government reported yesterday.

“There is an increase in confidence from Japanese investors for Indonesia’s credit story,” Jakarta-based Pakpahan said. “This issuance received a pretty good response and was oversubscribed, with most of the demand coming from the banking and insurance sector.”

Rating Upgrades

Moody’s and Fitch both cited Indonesia’s strong and resilient economic growth for ratings decisions that took the country’s rankings to Baa3 and BBB-, respectively, the lowest investment grades. Tokyo-based Rating and Investment Information Inc. upgraded its assessment to one level above junk with a stable outlook on Oct. 18.

Indonesia last sold Samurai bonds, or yen-denominated notes from foreign issuers, in November 2010, raising 60 billion yen in 10-year debt at 55 basis points above swaps. The securities yielded 1.18 percent today and have returned 6.4 percent since they were sold, data compiled by Bloomberg show. Mizuho Securities Co. was the joint arranger for the latest deal.

The yield on Japanese sovereign bonds due in 2022 was 0.76 percent in Tokyo, down 23 basis points, or 0.23 percentage point, from the end of last year.

Thomas Byrne, senior vice president for sovereign risk at Moody’s in Singapore, said in Jakarta today that Indonesia needs to cut its dependence on foreign-currency securities. Standard & Poor’s rates the Southeast Asian nation one step below investment grade.

“Indonesia’s Samurai bonds will probably be well accepted in the Japanese market,” Kenji Sakaguchi, who oversees 7.6 trillion yen of fixed income as chief investment officer at Prudential Investment Management Japan Co., said in an interview from Tokyo today. “It is possible we will include Indonesia in our portfolio in the future with its improving credit profile, but we remain cautious given their current credit rating by international rating agencies.”

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Yudith Ho in Jakarta at yho35@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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