Danantara, Indonesia's sovereign wealth fund, has postponed a planned dollar bond issuance due to a challenging global funding landscape. The decision comes as global investors are demanding higher yields for long-term instruments, specifically 20- and 30-year notes, than the fund's initial targets. This follows Danantara's successful debut last month, where it raised $1.5 billion through five- and 10-year notes.
The delay is significantly influenced by a sharp increase in the 30-year US Treasury yield, which has reached 5.2%, its highest level in nearly two decades. This surge has substantially increased the cost of long-term financing. Additionally, investor sentiment towards Indonesian dollar bonds has weakened, partly due to the resignation of the central bank governor, according to Zerlina Zeng, Head of Asia Credit at CreditSights Singapore.
The broader Asian dollar bond market reflects these difficulties, with total issuance reaching only $5.6 billion in the two weeks leading up to July 17, significantly below historical averages. China's corporate bond issuance during this period was a mere $530 million, indicating a widespread cautious stance among market participants. Geopolitical tensions and global macroeconomic risks are expected to continue suppressing activity in the primary dollar bond market across Asia.
Danantara's relatively new operational and investment track record also contributes to investor caution regarding the institution's governance and transparency. Domestically, rising inflation expectations are projected to further push up US Treasury yields, negatively impacting global bond performance. These factors combined have led Danantara to wait for more favorable market conditions before proceeding with its long-term dollar bond plans.
