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Bond Market News
Indonesian Issuers’ Dollar Bond Spreads Widen
June 24, 2024
Dollar bonds of Indonesian state-owned issuers such as PT Perusahaan Listrik Negara (PLN) and PT Pertamina have been under pressure over the last two weeks due to growing concerns over the nation’s debt. Bloomberg news reported that the President-elect Prabowo Subianto plans to raise the country’s debt ratio to fund his spending promises. This will likely raise refinancing costs for the nation’s corporate debt, as over $6bn of dollar debt is set to become due through to the end of 2025. “The tightness in credit spreads in general right now give little room for any rate volatility or adverse change in risk perception, while the weakness in rupiah is certainly bad for future external debt repayments,” said Ting Meng, senior Asia credit strategist at Australia & New Zealand Banking Group. Looking at z-spreads of PLN’s 2050s and Pertamina’s 2060s for example, we see that the bonds’ spreads have widened by 30bp and 17bp since end-May to 239bp and 226bp respectively. Over this same period, Asia ex-Japan CDS spreads have widened by 7bp to 100bp.
PLN’s 2050s trade at a yield of 6.14% while Pertamina’s 2060s offer a yield of 5.86% currently.
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