The Republic of Indonesia (RoI) closely followed the Republic of the Philippines (RoI) into the G3 bond market as it priced on January 8 a dual-tranche offering totaling US$4 billion.

Riding on the US treasury rally, the Reg S/144A issuance was equally split at US$2 billion each with the 10-year bonds priced at 99.393% with a coupon of 4.125% to offer a yield of 4.20%. This was at the tight end of the final price guidance of 4.25% area (+/- 5bp) and 30bp inside the initial guidance of 4.50% area.

The second tranche for 30 years was priced at 98.867% with a coupon of 5.125% to offer a yield of 5.20%. This was also at the low end of the final price guidance of 5.25% area (+/- 5bp) and likewise 30bp tighter than the initial guidance of 5.50% area.

At these levels, both tranches were basically flat to where RoI's existing bonds were trading before the deal announcement, a banker familiar with the deal says. The latest foray was exactly similar with what the sovereign did in January 2014 when it also priced a US$4 billion dual tranche bonds, split into US$2 billion each of 10 years and 30 years.

This time, though, the pricing was much tighter as the 2014 borrowing showed the 10-year tranche had a coupon of 5.875% to offer a yield of 5.95%, while the 30-year tranche had a coupon of 6.75% to offer a yield of 6.85%.

The latest bonds continued to perform in the secondary market with the 2045s trading in the early afternoon of January 9 at 99.90% for a yield of 5.13% - or 7bp tighter than re-offer, while the 2025s were quoted at 99.8% for a yield of 4.15% - or 5bp inside re-offer.

Both tranches attracted robust demand from investors with the total order book amounting to over US$20 billion that enabled the arrangers - Citi, HSBC and Standard Chartered - to revise the initial price guidance by 25bp each.

The 10-year bonds garnered US$10 billion worth of orders from 410 accounts with 48% of the paper allocated in the US, 28% in Asia and 24% in Europe. By type of investors, asset and fund managers took 73%, banks 14%, insurance companies and pension funds 9%, private banks 2%, and public entities 2%.

The 30-year bonds likewise generated US$10 billion in total demand from 405 accounts with 53% sold in the US, 24% in Asia and 23% in Europe. Asset and fund managers were also the biggest buyers of the paper as they accounted for 75%, followed by insurance companies and pension funds with 13%, banks 8%, private banks 2% and public entities 2%.

"Like the RoP, the RoI is a high quality name and a well-understood credit and it benefited from the flight to quality," the banker points out. "Both sovereigns have managed their financing responsibly and have strong track record in the debt markets, which appeals to investors."

The bonds are drawn under RoI's US$30 billion global medium term note programme. Bahana Securities, Danareksa Sekuritas and Mandiri Sekuritas were co-managers for the transaction.