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.