Indonesia, which saw its credit rating rise to investment grade last month, is testing the waters with plans for its first dollar-denominated bond sale since then.
Government officials who had direct knowledge of the sale but declined to be identified told the Jakarta Globe that the debt would be of a benchmark size, which typically implies a value of at least $500 million.
Officials began meeting with investors on Monday for the bond sale, which may take place by the end of the second quarter.
Indonesia, which has sold both dollar- and rupiah-denominated bonds during the past few years, needs overseas funds to help plug its budget deficit.
The government also wants to test the appetite of investors after Fitch Ratings raised the country’s sovereign credit rating to investment grade on Dec. 15.
The officials said the government planned to offer the yield on the 10-year bonds in a range of 5.375 percent to 5.5 percent.
“Yes, it’s in the range,’’ one of the officials said.
Rahmat Waluyanto, director general of the debt management office at the Finance Ministry, was not immediately available for comment.
The last time Indonesia sold a large amount of bonds was in April, with $2.5 billion in 10-year, dollar-denominated bonds at a yield of 5.1 percent.
That sale followed a series of credit upgrades from ratings agencies to one level below investment grade. The government received total bids of $6.9 billion, or 2.9 times the amount on offer.
Investors from the United States accounted for 49 percent of the sale, while those from Asia and Europe accounted for 29 percent and 22 percent, respectively, the Finance Ministry said.
“There will definitely be demand,’’ Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta, said of the upcoming sale. “The price is reasonable.”
Wiling said the offering’s yield in the range of 5.375 percent to 5.5 percent meant the sale was priced to yield between 3.4 percent and 3.6 percent more than comparable US government securities. The 10-year US Treasury currently yields 1.9 percent.
The government has named HSBC Holdings, JPMorgan Chase and Standard Chartered as the underwriters of the bond sales, the officials said.
The move comes after President Susilo Bambang Yudhoyono urged the business community to take advantage of the country’s new investment-grade status and attract more foreign capital when he opened the year’s trading at the stock exchange.
The government has forecast the state budget shortfall this year to hit Rp 123.6 trillion, or 1.5 percent of gross domestic product.
Indonesia last year posted a budget deficit-to-GDP ratio of 1.27 percent, which amounted toRp 90.1 trillion, Finance Minister Agus Martowardojo said on Thursday.