U.S. trade slowing down, players eying Indonesia
U.S. trade slowing down, players eying Indonesia
NEW YORK (Reuters): Corporate bond players focused on a downgrade to Indonesia's credit ratings in an otherwise nonexistent pre-holiday trading session.
Debt spreads remained unchanged as traders set out early ahead of New Year's Day holiday when U.S. financial markets will remain closed.
Meanwhile, Standard & Poors said early Wednesday it cut Indonesia's long-term foreign currency rating to BB-plus from BBB-minus and its local currency rating to BBB-plus from A-minus.
Prudential Securities sovereign bond analyst Tom O'Neill said the downgrade was significant but not unexpected.
The downgrade was not expected to hit the U.S. corporate bond market; however, with the same force that the downgrade of South Korea did earlier this month, said Scott MacDonald, director of sovereign bond research at Donaldson, Lufkin & Jenrette.
"There was no market in Indonesian corporate bonds on Wednesday," said MacDonald. However, he said the country's 2006- maturity sovereign bonds were trading at 555 to 500 basis points over Treasuries, showing a marginal widening on news of the downgrade.
"Spreads were already very wide in Indonesian paper reflecting a lot of the concerns about the country and the region that predated the downgrade," he said.
Next week, when the market wakes from its holiday slumber, MacDonald said there may not be any widening of Indonesian paper if other economic news from Asia is good.
In the U.S. government market, the benchmark 30-year U.S. Treasury bond closed up 21/32 at 102-25/32 to yield 5.93 percent.
Freeport
In conjunction with lowering of the ratings on the Republic of Indonesia, Standard & Poor's on Wednesday placed its ratings on Freeport-McMoran Copper & Gold Inc on CreditWatch with negative implications.
The CreditWatch placement reflects concerns relating to Freeport's exposure to the heightened fiscal and political risks of the Republic of Indonesia, as the company's primary asset is a massive copper and gold mining operation in Indonesia.