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The Finance Ministry has raised its target for a domestic retail debt issue to Rp 8 trillion ($888 million) from an initial Rp 5 trillion because demand for the three-year notes far exceeded expectations, an official said ahead of the weekend.

“On Friday alone we received total additional bids worth Rp 1.05 trillion,” said Bimantara Widyajala, the director of state securities from the ministry’s debt management division.

Bids opened for the ORI 007 bond, which offers a coupon rate of 7.95 percent, on July 15. By the weekend, demand from retail investors had reached Rp 7.08 trillion, the ministry said. The issuance period ends on Friday.

Purbaya Yudhi Sadewa, chief economist at Danareksa Research Institute, said the excess demand for the bond should motivate the government to focus more on domestic investors rather than looking abroad to sell its debt.

Local investors were currently looking for a better-yielding but safe alternative to parking their money in domestic banks.

“The 007’s coupon is still higher compared to the rates [on similar-duration] term deposits offered by banks, which only reach from 6 percent to 6.5 percent. Moreover, inflation looks likely to be relatively tame this year, so bank deposit rates are unlikely to rise,” Purbaya said.

The government has appointed 15 banks and eight securities firms to sell the bonds.

Indonesia has been tapping debt markets to finance a budget deficit estimated to widen to 2.1 percent, or about Rp 133 trillion, of GDP this year, up from 1.6 percent in 2009.

The government has recently switched back to issuing domestic retail bonds after it a disappointing string of global sales for longer-term sukuk, or Islamic bonds.

On July 13, the government managed to sell just Rp 246 billion of the bonds, falling far short of the Rp 1 trillion target. The auction was the 11th this year in which the government either failed to raise any funding or sales fell short because investors demanded higher yields.