RI's Yankee bond shaken by riot

RI's Yankee bond shaken by riot

NEW YORK (Reuter): Indonesia's $400 million Yankee bond issued
last Wednesday widened nearly 10 points in U.S. trade on Monday
in response to political unrest in Jakarta over the weekend,
corporate bond traders said.

The Indonesian 10-year notes, which priced last Wednesday at a
spread of 100 basis points over U.S. Treasuries, were quoted at
108 bid on Monday, dealers said. The notes were bid through 100
basis points when freed to trade on Friday.

Despite the move, traders and analysts said the spread held
within a reasonable range and did not reflect serious erosion.

"It's not melting," an international high-yield trader said.
"There are buyers out there and it's an opportunity for some
people. 10 (basis points) is understandable given what happened
over the weekend."

Weekend riots broke out after police took over the
headquarters of the Indonesian Democratic Party from supporters
of ousted party chief Megawati Sukarnoputri.

The riots, in which two people were reportedly killed, sent
the Indonesian financial markets tumbling on Monday.

While the sovereign issue slipped, Indonesian corporate issues
were quoted down a less dramatic one to 1-1/2 points in U.S.
trade on Monday, according to traders. Traders noted the softness
of the overall market on Monday exacerbated any negative reaction
of the riot.

Asia Pulp & Paper's 11-3/4 percent debt due 2005 was quoted
off about one point at 102-1/2 bid, 103-1/4 offer at spreads of
440 and 427, respectively.

Nancy Northrop, vice president and emerging market analyst at
Alliance Capital Management, underscored the reaction fell short
of panic selling. The atmosphere in Jakarta is tense but not
worsening, she noted, making a bounce-back for Indonesian
securities a good bet.

"The government seems to be pretty much in control," Northrop
said, "The situation seems to be quieting down, which doesn't
mean there won't be more protests, but the military plays a role
of stabilizer in Indonesia."

Northrop also said the riots are less threatening to political
stability because Megawati's support base is very small
considering the size of the country.

Standard & Poor's sovereign ratings analyst Cem Karacadag also
said the protest does not portend serious political instability.

"I don't think this reflects a widespread or deep rooted
discontent with the government's social and economic policies,"
Karacadag said, adding "Cautious economic policies and prudent
debt management should remain undisturbed by the events."
S&P rates Indonesia's long-term foreign currency debt BBB.