Indonesia benchmark bonds fare worst in Asian markets

Indonesia benchmark bonds fare worst in Asian markets

SINGAPORE (Dow Jones): Spreads on Asian benchmark bonds ended
the week mostly wider as regional markets came under pressure
from continued volatility on Wall Street and a host of local
factors.

Spreads over comparable U.S. Treasurys widened by an average
of about 20 basis points, with Indonesia's 7.75 percent 2006
issue getting hammered the hardest. Malaysian issues fared the
best following an upbeat report on the country's first-quarter
economic growth.

Malaysia's 8.75 percent bond dated 2009 outperformed other
regional sovereigns, with the spread finishing the week seven
basis points wider. State oil giant Petronas saw the spread on
its 7.125 percent 2006 bond narrow by five basis points for the
week.

Government data issued this week showed that the Malaysian
economy expanded by a stronger-than-expected 11.7 percent in the
first quarter, compared with a year earlier.

ABN Amro Bank boosted its estimate for Malaysian economic
growth this year to 7.5 percent from 6.5 percent, and is bullish
on the country's debt.

"With the strong growth story and Malaysia's sovereign rating
being a prime candidate for a likely upgrade later this year, the
significant widening of the spreads on the Malay '09 could
provide opportunity for longer-term investors to begin their
bargain hunting," ABN Amro analysts said in a research report.

The spread on Indonesia 2006 swelled by 65 basis points as
investors exercised caution in the wake of almost-daily
demonstrations against former President Suharto.

Hundreds of students clashed with police near Suharto's home
Thursday, demanding that he be tried on allegations of corruption
during his 32 years in power.

Civil unrest in the Philippines weighed on local markets. The
spread on Philippines benchmark bond of 2008 widened by 38 basis
points as the government showed no signs of gaining control over
a Muslim separatist movement.

Investors apparently were unimpressed by the approval of a
measure allowing greater supervision and increased foreign
competition in the country's banking sector.

"While this is broadly positive for the sector, this move by
itself is not sufficient to reverse currency market perceptions
with respect to the Philippines," Raja Visweswaran, head of Asia
securities research at Bank of America, said in a note to
clients.

South Korea's bond prices slipped following news of liquidity
troubles at one of Hyundai Group's affiliates.

The spread on the country's 8.75 percent 2003 issue widened by
38 basis points. Korea 2008 and Korea Development Bank 2004 fared
better.

China's benchmark bond dated 2008 was helped by the U.S. House
of Representatives' approval of a measure that would extend
permanent normal trade relations to China.

The spread on the issue narrowed after the vote, but still
finished the week 10 basis points wider.