After last week's successful issuance of euro-denominated bonds, the government of Indonesia has now conducted a successful issuance of yen-denominated bonds (known as samurai bonds). Indonesia's Finance Ministry said it raised 100 billion yen (approx. USD $942 million) on Wednesday (15/06) from a private placement of samurai bonds to institutional investors in Japan. Lead underwriters of the bond issuance were Mitsubishi UFJ Morgan Stanley Securities Co Ltd, Mizuho Securities Co Ltd, and SMBC Nikko Securities Inc.
The samurai bond issuance involved two series: series G (through which the government raised 62 billion yen of three-year bonds - that mature on 21 June 2019 - with a coupon at 0.83 percent) and series H (38 billion yen of five-year bonds with a 1.16 percent coupon that mature on 21 June 2021). The issuance of these dual-tranche bonds constitute the first samurai bond issuance without carrying a guarantee from the JBIC (a Japanese government guarantee). As such, the successful sale can be seen as a sign that Japanese investors' confidence in Indonesia's fiscal stability and economic fundamentals has increased.
Credit rating agency Moody's Investors Service assigned a Baa3 rating for Indonesia's samurai bonds, while Fitch Ratings assigned a BBB- rating to these bonds (these ratings are in line with the country's sovereign debt ratings).
Indonesian Finance Minister Bambang Brodjonegoro said the samurai bonds are issued at the right timing, considering that the Bank of Japan implemented negative interest rates in order to boost inflation and economic growth in the world's third-largest economy. On Thursday (16/06), the Bank of Japan maintained its stimulus policy at the June policy meeting with interest rates at -0.1 percent.
Last week, Indonesia sold €3 billion worth of euro-denominated bonds consisting of €1.5 billion of 7-year tenure bonds (2.772 percent yield) and €1.5 billion of 12-year tenure bonds (3.906 percent yield), Indonesia's largest ever euro-bonds sale. Combined, the issuance was oversubscribed 1.79 times with a total book order for the dual-tranche bonds at €8.36 billion. Proceeds are to be used to plug the 2016 budget deficit, which is expected to widen to 2.48 percent of the nation's gross domestic product (GDP).
Indonesia is now an expert at borrowing and printing money! Now let's see if Indonesia can spend it wisely.