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.