Aniket Pujari(Bloomberg) — Indonesian companies’ dollar bond spreads have hit their widest level in six months as credit traders digest the ramifications of a brutal stock market selloff.
The average yield premium on dollar-denominated Indonesian corporate bonds hit around 144 basis points over Treasuries at Tuesday’s close, the highest level since September, according to Bloomberg data. They have now widened almost 16 basis points so far this month, under-performing bonds issued by companies elsewhere in Southeast Asia.
The latest widening came alongside a sharp decline in Indonesian stocks, with the benchmark stock index falling as much as 7.1% during intraday trading on Tuesday before paring some of its losses in the afternoon.
Traders said there wasn’t one root cause of the fall, pointing to factors including concerns over the populist agenda of President Prabowo Subianto and a rumor — 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 $1 billion out of the domestic bond market on March 17, according to finance ministry data.
Last week, Goldman Sachs Group Inc. 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-favored previously.
The dollar bonds of state-owned PT Bank Negara Indonesia and state electricity company PT Perusahaan Listrik Negara were among those that faced selling pressure on Tuesday.
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