redit rating agencies have forecast a surge in the issuance of rupiah-denominated corporate bonds this year, driven by rising demand for refinancing and heightened currency risks associated with United States dollar-denominated bonds.
The threat of a US recession, potentially leading to aggressive interest rate cuts by the US Federal Reserve (Fed), is expected to further bolster domestic bond issuance.
According to credit rating agency Fitch Ratings, domestic bond issuance by nonfinancial firms reached Rp 28 trillion (US$1.75 billion) in this year’s first half. The figure is forecast to exceed Rp 65 trillion for the full year, up from the Rp 60 trillion issued last year.
“We expect investment in pulp and paper, telcos and downstream minerals, along with high refinancing needs, to drive 2024 issuance. We estimate up to Rp 40 trillion in onshore notes will mature in the second half,” Fitch Ratings noted in its July 31 report.
Local credit rating agency Pefindo agreed that rupiah bond issuance would increase this year. The firm revealed that total domestic corporate bond issuance, including by financial companies, reached Rp 84.3 trillion as of July, up from around Rp 75 trillion recorded during the same period last year.
The firm expects that number to rise to between Rp 148.2 trillion and Rp 169.1 trillion by the year-end, handily exceeding last year’s Rp 130.8 trillion.
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“Demand for refinancing is expected to rise, as indicated by Rp 150.5 trillion in bonds maturing this year, higher than the Rp 126.9 trillion that matured last year. This increase is due to more companies issuing bonds of shorter tenure,” Suhindarto, who heads the economic research division at Pefindo, told The Jakarta Post on Wednesday.