Indonesia, Philippines Plan January Global Debt Sales

Businessweek

By Shelley Smith, January 04, 2010, 08:38 AM EST

Jan. 4 (Bloomberg) -- Indonesia, the Philippines and Vietnam are competing to be among the first Asian governments to sell foreign-currency bonds in 2010, as a global economic recovery supports investor appetite for emerging-market debt.

Indonesia plans to sell as much as $4 billion of U.S. dollar bonds with 10- and 30-year maturities, a person familiar with the matter said today. The Philippines is preparing to sell as much as $1.5 billion of debt denominated in dollars or euros, while Vietnam plans to raise as much as $1 billion in dollar bonds this month, according to people aware of the plans.

“There’s appetite for high-yielders,” said Michael Pisler, an emerging-market debt trader at SJS Markets Ltd. in Hong Kong. “The biggest determining factor will be fund inflows into the region as the economies improve.”

The difference in yield to own bonds in developing countries instead of Treasuries dropped 4.16 percentage points last year to 2.74 percentage points, according to an index compiled by JPMorgan Chase & Co. Global funds bought more than $8 billion of emerging-market debt in 2009, after pulling out $18 billion in 2008, according to data published by EPFR Global.

The government may sell global bonds through a placement “when the time is right,” Finance Minister Sri Mulyani Indrawati said in Jakarta today, without giving details. Indonesia hired Barclays Capital Plc, Citigroup Inc. and Credit Suisse Group AG for a sale, a ministry official said last month.

Time is Right

Indonesia, Southeast Asia’s biggest economy, last sold $3 billion of bonds in overseas markets in February, and raised $650 million from the sale of Islamic dollar bonds in April. The government plans to raise $11 billion from local and overseas bond sales in 2010 to finance a budget deficit forecast at 98 trillion rupiah ($10.4 billion), or 1.6 percent of gross domestic product

Indonesia’s budget deficit totaled 87.2 trillion rupiah last year, less than a forecast 129.8 trillion rupiah, the Finance Ministry said on Jan. 1. The economy probably grew 4.3 percent to 4.4 percent last year, the ministry said.

Moody’s Investors Service lifted Indonesia’s foreign- currency debt ratings one level to Ba2 on Sept. 16, citing the economy’s resilience. The Moody’s rating is two levels below investment grade.

Investors demand a 2.08 percentage points yield premium over U.S. Treasuries to buy Indonesian debt, according to the JPMorgan EMBI+ spread. The gap narrowed 70 basis points in 2009, compared with a 167 basis points widening in 2008. The cost to protect the bonds against default also fell in 2009, according to credit-default swap prices compiled by CMA DataVision.

Philippines, Vietnam

Yields on Indonesian 30-year debt and Philippine 25-year dollar debt rose today, ING Groep prices showed.

The Philippines has sold dollar-denominated bonds every January since 2005, according to data compiled by Bloomberg. It plans to raise $2 billion from the sale of overseas debt in 2010 to fund a budget deficit that Finance Secretary Gary Teves said may climb to a record 293 billion pesos ($6.4 billion) this year.

The Philippines is “opportunistic” in its borrowing and will sell overseas bonds when it’s the “right time,” central bank Governor Amando Tetangco told reporters today in Manila.

The central bank allowed the government “in principle” to sell up to $1.5 billion of global bonds, a person familiar said on Dec. 29. Separate approval was given to a plan to sell about $500 million in yen-denominated bonds, the person said.

“The government would want to put its finances in a solid footing by borrowing abroad early and at good levels,” said Roland Avante, treasurer at Manila-based Sterling Bank of Asia. “That, and the huge liquidity in the local market, would help ease pressure on domestic debt.”

Vietnam may sell notes with 10-year maturities, according to a person who declined to be identified before a public announcement. Vietnam hired Barclays Capital, Citigroup Inc. and Deutsche Bank AG to manage the sale, the person said.

--With assistance from David Yong in Singapore and Clarissa Batino in Manila. Editors: Sandy Hendry, Tom Kohn

To contact the reporter on this story: Shelley Smith in Hong Kong at +852-2977-6623 or ssmith118@bloomberg.net

To contact the editor responsible for this story: Tom Kohn at +852-2977-6610 or tkohn@bloomberg.net; Sandy Hendry at +852-2977-6608 or shendry@bloomberg.net.