Morning Commentary: Indonesia sells $4 billion of new notes; emerging market credit mostly steady

By Rebecca Melvin

New York, Dec. 5 – The Republic of Indonesia’s new $4 billion of senior notes hit the market on Tuesday after pricing late Monday. The five-, 10- and 30-year tranches priced at the tight end of final price guidance and with a negative new issue premium across all three tranches, according to a government news release.

“The issuance resets the Indonesian yield curve whilst diversifying the investor base with the new SEC-registered format. Additionally, the 3.00% yield on the five-year and the 4.40% yield on the 30-year coupons are the lowest ever achieved in those tenors by the Republic of Indonesia while the US$4 billion issue size matches its January 2014 and January 2015 issues as the largest issuances done,” the release stated.

The final order book for the Indonesia notes showed diversified demand across regions and investor types with 120, 129 and 153 accounts participating in the five-, 10- and 30-year notes, respectively.

Forty percent of the five-year tranche was allocated to the United States, 25% to Europe, 21% to Asia (ex-Indonesia) and 14% to Indonesia. By investor type, 54% was allocated to asset managers, 26% to banks, 10% to pension funds and insurers, 8% to sovereign wealth funds/central banks and the remaining 2% to private banks.

The 10-year tranche was allocated 48% to the United States, 22% to Europe, 20% to Asia (ex-Indonesia) and 10% to Indonesia. By investor type, 47% was allocated to asset managers, 32% to banks, 19% to pension funds and insurers, and 2% to sovereign wealth funds/central banks.

And the 30-year tranche was allocated 65% to the U.S., 12% to Europe, 22% to Asia (ex-Indonesia) and 1% to Indonesia. By investor type, 59% was allocated to asset managers, 27% to pension funds and insurers, 10% to banks, and 4% to sovereign wealth funds/central banks.

In general emerging market credit was mostly steady. Investors eyed the confirmation process of nominee Jerome Powell as the next chair of the U.S. Federal Reserve. Powell’s nomination cleared the U.S. Senate Banking Committee handily with a 22-1 vote in favor of the nomination. If confirmed, Powell will succeed Janet Yellen when her four-year term expires on Feb. 3.

Elsewhere, a two-day Gulf Cooperation Council Summit got underway in Kuwait as a boycott of Qatar by some of its members continues. The United Arab Emirates announced at the start of the meeting that it has formed a new economic and military alliance with Saudi Arabia separate from the GCC.

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