Although a huge amount of debt paper will mature in 2016, there is few concern that the Indonesian government and the nation's private companies will fail to meet their debt obligations. Per 17 February, total outstanding debt paper that is to mature in 2016 stands at IDR 320.9 trillion (approx. USD $23.8 billion), consisting of IDR 268.1 trillion (approx. USD $19.9 billion) of government bonds (Surat Utang Negara or SUN) and IDR 52.8 trillion (approx. USD $3.9 billion) of private sector corporate bonds. Why are there no major concerns about Indonesia's debt situation in 2016?

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The government of Indonesia plans to issue (foreign currency-denominated) global bonds worth USD $10 billion to cover a shortfall in the 2016 State Budget. These global bonds would be part of a total of IDR 510 trillion (approx. USD $37 billion) worth of bonds that the government plans to sell in 2016. Scenaider Siahaan, Director of Borrowing Strategy at Indonesia's Finance Ministry, said about USD $4 billion of these global bonds are US dollar-denominated. For such bonds, the government usually appoints Bank of America Merrill Lynch, CIMB, Citigroup, and HSBC as book-runners.

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The Samurai (yen-denominated) bonds that are to be issued by the Indonesian government (through private placement) received a provisional rating of (P)Baa3 (stable outlook) from Moody’s Investors Service. Part of the Samurai bonds to be used by the government are without guarantees from the Japan Bank for International Cooperation (JBIC). It will be the first time for Indonesia to issue unguaranteed Samurai bonds since 1983 and thus the issuance serves as a test to measure Japanese investors’ confidence in Indonesian assets.

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Budget airline Indonesia AirAsia, the local unit of Malaysia's AirAsia and one of the world's leading low-cost carriers, seeks to collect up to USD $250 million over the next two years through an initial public offering (IPO) on the Indonesia Stock Exchange (IDX) as well as the issuance of convertible bonds. The company aims to raise around USD $110 million worth of convertible bonds (which will have a low coupon rate with a 2-year maturity), while the IPO (which is scheduled for 2017) is expected to generate about USD $150 million.

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Despite pressures on the rupiah exchange rate amid a bullish US dollar ahead of monetary tightening in the USA, the Deutsche Bank, one of the world's leading financial service providers, holds a positive view on Indonesian bonds due to Indonesia’s recent fuel subsidy reforms and solid macroeconomic fundamentals. According to the German lender, Indonesian bond yields seem to have decoupled from the currency’s recent depreciating trend although “continued foreign exchange stress could eventually lead to capitulation from bond investors.

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According to Indonesian Finance Ministry’s State Bond Director Loto Srinaita Ginting, the government of Indonesia intends to issue more than USD $500 million worth of samurai bonds in the fourth quarter of 2014. Samurai bonds are yen-denominated bonds. However, Ginting provided no further details about the bonds issuance. The Finance Ministry also plans to issue IDR 20 trillion (USD $1.7 billion) worth of domestic retail bonds in September 2014 (but these bonds are only available to Indonesians).

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The Indonesian rupiah exchange rate is heading for its biggest weekly decline since the second week of December 2013. According to the Bloomberg Dollar Index, the currency of Southeast Asia's largest economy had depreciated 0.36 percent to IDR 11,572 per US dollar by 2.30pm local Jakarta time on Friday (23/05). However, year to date, the rupiah is still among the best performing Asian emerging currencies against the greenback (+5.19 percent). What are the reasons that explain the rupiah's weak performance this week?

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