March 30, 2017 / 8:26 AM / 8 months ago

Indonesia's U.S.-dollar sukuk sale attracts more investors

JAKARTA, March 30 (Reuters) - Indonesia’s latest issuance of U.S.-dollar denominated Islamic bonds attracted greater investment from funds in the United States, an Indonesian government official said on Thursday.

Southeast Asia’s largest economy raised $3 billion this week from a dual-tranche sukuk sale, the highest amount the country has ever raised, said Robert Pakpahan, finance ministry’s director general of financing and risk management.

U.S. investors bought a total of $790 million of the 5-year and 10-year Islamic bonds, which were priced at 3.4 percent and 4.15 percent, respectively.

In March last year, U.S. investors only subscribed to about $277.5 million of the $2.5 billion sukuk sold by Indonesia, according to government data. The 5-year sukuk was also priced at 3.4 percent at the time, while the 10-year sukuk was priced at 4.55 percent.

The rising interest from American investors came despite Indonesia offering a smaller spread between its yield and that of the U.S. treasury notes.

In the past 12 months, there have been two U.S. interest rate hikes and three rate cuts in Jakarta.

“American investors became more convinced that sukuk is an instrument they can trust with the same quality as the conventional ones,” Pakpahan said.

The Indonesian sukuk is now eligible for JPMorgan’s EMBI Global Diversified Index, Thomson Reuters’ publication IFR reported earlier this week, saying the change had prompted some investors to buy in larger size and made it easier for others to decide to participate.

Pakpahan said Indonesia will sell two more foreign currency-denominated debts this year - in euro and yen. The timing of each issuance would depend on many aspects, including elections in a few European countries, he added.

Last month, Pakpahan told at an investor conference call that the Indonesian government expected to sell a total of $5.5 billion worth of bonds to global markets this year, including the U.S.-dollar sukuk. (Reporting by Hidayat Setiaji; Writing by Gayatri Suroyo; Editing by Sherry Jacob-Phillips)

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