RI benchmark firmer on better sentiment

RI benchmark firmer on better sentiment

HONG KONG (Dow Jones): Spreads on Asian benchmark bonds were mixed Friday from a week ago, with Indonesia benefiting from improved sentiment as fears about a possible impeachment of President Abdurrahman" Gus Dur" Wahid dwindled.

As Gus Dur and the public listened to speeches by parliamentarians ahead of the vote of confidence, sentiment that parliament will cast their vote in favor of Wahid became stronger.

As a result, Indonesia's 2006 benchmark tightened by 36 basis points against U.S. Treasurys from a week ago.

"The news is good so (market) sentiment is better," said one trader in Hong Kong.

The difference between bid and offer prices remained wide, at 57 basis points Friday, reflecting the illiquidity of the bond and a lack of trading due to continued uncertainty.

"There's no real selling or buying" of Indonesia's paper, said another trader.

Market participants said that trading of Indonesian bonds will remain volatile and slim at least until the end of the summer when Indonesia's political future may be clearer.

Elsewhere, Asian bonds remained well bid despite some slight spread widening overnight because of a drop in U.S. Treasury yields in the New York session.

U.S. Treasury yields tightened across the board overnight, as the market rallied after the government's successful sale of $5 billion on 30-year Treasurys. The yields climbed slightly higher earlier in Tokyo on profit taking.

Traders said that any trading will remain subdued through the month, ahead of the U.S. Federal Reserve's rate decision on Aug. 22. Recent mixed economic data in the U.S. and more dovish comments from Federal Reserve officials are leaving market participants to guess which way the Fed will eventually lean.