Indonesia prices $1.5 billion bond at tightest spreads ever

Yet another issuer prints a curve-busting deal at record-low pricing and record-high size.
The Republic of Indonesia has priced a $1.5 billion 30-year deal with all-time tight spreads and all-time low yields.

The sovereign had earlier telegraphed a $2 billion deal, but eventually realised that a smaller deal offered the best value û though it hardly seems fair to talk about this deal as small. No Asian issuer has ever raised more from a single tranche in the G3 bond markets, though the Philippines has matched it.

The bonds were printed with a coupon of 6.625%, to yield 6.75% or 189.3bp over US Treasuries. At that level, it is arguable whether the trade priced through its curve or flat to it. The 2035 bonds were trading at the 669bp level early in the bookbuilding process but had moved out to 674bp by the time of pricing.

IndonesiaÆs yield curve pays 3bp a year, which means that the new 2037 bonds started out flat to the curve but had punched through it by the close û thanks in part to investors selling the 2035s to buy into the new offer.

Either way, it was a solid deal and one that highlights again the aggressive pricing that every deal now seems able to achieve. ôIf you go back to 2000,ö says one banker, ôUS Treasuries were trading higher than this. This is as good as itÆs ever been for Indonesia.ö

Having priced at 98.4, the deal closed slightly up at the end of its first day, at 98.5, and stayed within a 10bp range for the whole day.

The lead banks û Citigroup, Deutsche Bank and UBS û booked $5.25 billion of orders and distributed the notes to 250 accounts, with 38% to Asia, 37% to the US and 25% to Europe.

By investor type, asset managers got 41%, banks 22%, hedge funds 18%, private banks 11% and the remaining 8% went to insurance companies and others.
¬ Haymarket Media Limited. All rights reserved.