Failed Islamic Bond Auctions Forcing Govt to Look Overseas
The failure of 10 rupiah-denominated sukuk auctions this year has prompted the Finance Ministry to revive demand for its Islamic debt by tapping international investors and changing its sales practices. Indonesia has raised Rp 4.9 trillion ($540 million) from notes that comply with Islam’s ban on interest so far this year, down 40 percent from a year earlier, according to the ministry’s Debt Management Office. The next auction is seeking Rp 1 trillion.
Indonesia may negotiate rates through book-building rather than in a single auction. Domestic investors are demanding higher returns from the bonds because they aren’t actively traded, according to PT Bank Danamon Indonesia and PT Bank Syariah Mandiri. Indonesia sold its first domestic sukuk in August 2008 through book-building. State-owned PT Danareksa Sekuritas, PT Mandiri Sekuritas and PT Trimegah Sekuritas arranged the sale, which raised 2.7 trillion rupiah. The government had 38 trillion rupiah of sukuk outstanding as of June 29. (more…)
