[JAKARTA] Indonesian companies’ dollar bond spreads have hit their widest level in six months as credit traders digest the ramifications of a brutal stock market sell-off.
The average yield premium on US dollar-denominated Indonesian corporate bonds hit around 144 basis points over Treasuries at Tuesday’s (Mar 18) close, the highest level since September, according to Bloomberg data. They have now widened almost 16 basis points so far this month, underperforming bonds issued by companies elsewhere in South-east Asia.
The latest widening came alongside a sharp decline in Indonesian stocks, with the benchmark stock index falling as much as 7.1 per cent during intraday trading on Tuesday before paring some of its losses in the afternoon.
Traders said there was not one root cause of the fall, pointing to factors including concerns over the populist agenda of President Prabowo Subianto and a rumour – quickly denied – that Finance Minister Sri Mulyani Indrawati was standing down.
The stock rout offered more bad news for credit traders, who have been backing away from Indonesia bonds this week. Corporate dollar bond spreads have now widened for four days in a row, while global funds pulled more than US$1 billion out of the domestic bond market on Mar 17, according to finance ministry data.
Last week, Goldman Sachs downgraded Indonesian assets, citing rising fiscal risks from a series of initiatives by President Prabowo Subianto. The Wall Street bank lowered its recommendations on 10- to 20-year quasi sovereign bonds to neutral, after they had been among the most favoured previously.
The dollar bonds of state-owned Bank Negara Indonesia and state electricity company Perusahaan Listrik Negara were among those that faced selling pressure on Tuesday. BLOOMBERG
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