Indonesia's newly-issued sovereign dollar bonds rose on Wednesday, outperforming the broad market, which saw spreads generally widen on worries central banks in Asia may follow China's move to tighten liquidity. Indonesia on Tuesday sold $2 billion of 10-year bonds at a spread of 227.9 basis points (bps) over comparable US Treasuries.
The bonds were traded at 99.50/99.625 cents on the dollar, up from the issue price of 99.044. "People like to have an exposure in Indonesia. It's more of the macro play that people like about Indonesia," said Arthur Lau, fund manager at JF Asset Management.
Optimism about the economy, expectations of a credit upgrade and the government's plan to diversify into other markets for its fund-raising will also help lure more investors into the dollar bonds, traders said. Jakarta plans to issue samurai bond and global sukuk during the first half of 2010, but has no urgent need to sell additional dollar bonds abroad, an official said.
Tuesday's sale received $4.5 billion in orders, a source said. Of the total bonds sold, investors from the US accounted for 49 percent, Europe 27 percent and Asia 24 percent, the source said. By investor type, asset managers and hedge funds accounted for 69 percent, banks 14 percent, insurance and pension funds 11 percent and retail investors, 6 percent, the source said.
"We are seeing better bids right now, mostly from US offshore accounts," said Bryan Lai, senior credit analyst at Calyon. The overall market, however, was weighed down by Beijing's move on Tuesday to raise the reserve requirement on banks.
The Asia ex-Japan iTraxx investment-grade index was quoted at 90/94 basis points (bps), traders said, widening from 85/88 in the previous session, a 20-month low. The Thomson Reuters Index of Asia emerging credit was quoted at 119.17 on a weighted average basis and at 179.73 bps based on simple average. "It may trigger an acceleration in policy tightening elsewhere," said Viktor Hjort, credit strategist at Morgan Stanley.