Indonesian state-owned lender PT Bank Tabungan Negara (BTN) has decided to cancel its planned dollar bond sale, citing intense market volatility. The bank had initiated the marketing of its five-year dollar-denominated Tier 2 notes on Tuesday but pulled the offering shortly afterward as the selloff in the stock market quickly spread to other asset classes. According to sources familiar with the matter, BTN may consider reentering the market at a later time, though no immediate plans have been confirmed. The bank itself acknowledged the delay in a statement to Bloomberg News.
The decision comes on the heels of a sharp decline in Indonesian corporate bond prices, with spreads on dollar-denominated bonds widening to their highest level in six months. This was part of a broader selloff in the market, triggered by a slump in local stock prices.
Nicholas Yap, head of Asia credit desk analysts at Nomura Holdings Inc., noted that the timing of BTN’s planned bond issuance was unfortunate, coinciding with a day of significant equity market volatility in Indonesia. Yap added that while the bank is majority government-owned, its financial fundamentals remain weak, with concerns about its asset quality and profitability.
Market traders pointed to several factors contributing to the selloff, including apprehensions surrounding the populist policies of President Prabowo Subianto and a quickly dispelled rumor that Finance Minister Sri Mulyani Indrawati was stepping down. Despite these uncertainties, the market reaction was severe.
As of Tuesday’s close, the average yield premium on dollar-denominated corporate bonds from Indonesia had risen to approximately 144 basis points over U.S. Treasuries, the highest level since September. This marks an increase of nearly 16 basis points since the start of the month, significantly underperforming other corporate bonds in Southeast Asia.
While the stock market showed signs of recovery on Wednesday with a 1% rebound in the benchmark index, bond traders remained on edge. The cost to insure Indonesian debt against default increased on Wednesday, according to reports from traders.
In addition to the broader market concerns, Goldman Sachs Group Inc. downgraded Indonesian assets last week, citing rising fiscal risks tied to President Prabowo Subianto’s economic initiatives. The Wall Street bank downgraded its outlook on 10- to 20-year quasi-sovereign bonds, which had previously been among the most favored investments.
On Tuesday, bonds from other state-owned entities, including PT Bank Negara Indonesia and PT Perusahaan Listrik Negara, also faced significant selling pressure, reflecting the broader market unease.
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