Indonesia has sold only 4.7tn rupiah of its debut rupiah-denominated Islamic bond, or sukuk, an amount slightly below its target. As a result, the government is likely to increase the size of its global dollar sukuk later this year in a bid to make up for the shortfall. The Indonesian government didn’t disclose results of the sale but bankers close to the deal said seven-year sukuk were sold at yields of 11.8% and 10-year sukuk at 11.95%. Remarkably, these yields were below those of comparable conventional government bonds. The government had targeted issuance of at least 5tn rupiah of the notes on the assumption that they’d be snapped up by Indonesian investors. Analysts and market participants had said local investors would welcome Islamic notes at a time when demand for government debt is on the rebound. But concerns remain that the large budget deficit could lead to oversupply in already-liquid conventional bonds. The government of the world’s most populous Muslim-majority nation is tapping the Islamic debt market in order to fund its budget deficit.
SUKUK DEBUT FALLS SHORT IN INDONESIA
Indonesia has sold only 4.7tn rupiah of its debut rupiah-denominated Islamic bond, or sukuk, an amount slightly below its target. As a result, the government is likely to increase the size of its global dollar sukuk later this year in a bid to make up for the shortfall.
