Indonesian corporate bond spreads widen following stock market decline

Indonesian companies' dollar bond spreads have reached their widest point in six months. This comes after a significant drop in the stock market that has shaken credit traders. As of Tuesday, the average yield premium on dollar-denominated corporate bonds from Indonesia stood at around 144 basis points above U.S. Treasuries. This is the highest level seen since September. Over the course of March, these spreads have widened by nearly 16 basis points, falling behind similar bonds from other Southeast Asian countries. The increase in spreads is linked to recent declines in Indonesian stocks. The benchmark stock index dropped by as much as 7.1% on Tuesday before regaining some ground later in the day. Traders noted that the decline has many causes. Concerns about President Prabowo Subianto's populist agenda and a false rumor regarding Finance Minister Sri Mulyani Indrawati's resignation were significant factors. This stock selloff has created additional challenges for credit traders, who have been reducing their investments in Indonesia's bonds. For four consecutive days, corporate dollar bond spreads have widened. On March 17, more than $1 billion left the domestic bond market, according to the finance ministry. Goldman Sachs Group recently downgraded Indonesian assets, citing increased fiscal risks due to the government's recent initiatives. The bank changed its recommendations for certain quasi-sovereign bonds from favorable to neutral. State-owned companies like PT Bank Negara Indonesia and PT Perusahaan Listrik Negara faced significant selling pressure on Tuesday.