Indonesian sovereign bond prices rose on Thursday as investors cheered provisional results that showed President Susilo Bambang Yudhoyono won a second term, while the broader market was also firmer. "The market seems to like Yudhoyono. One thing for sure, his administration can tame the deficit, especially if the government will decrease the subsidy packages on energy," a Hong Kong-based credit analyst said.
"The government could certainly afford to continue spending more on infrastructure and education, which are good for the economy, since they (Indonesia) are not affected much by the crisis." A quick count from the LSI polling agency on Wednesday showed Yudhoyono's tally stood at a commanding 60.82 percent. Other agencies put his score slightly lower, but all showed he was comfortably above the halfway mark needed to avoid a need for a second round election.
The 11.625 percent bond due in 2019 rose to 129.50/130.75 from 128.25/129.00 on Wednesday, traders said. The debt has gained sharply from its issue price of 99.276 in February this year. The country's five-year credit default swap (CDS) narrowed to 300/315 basis points (bps) from 310/335, traders said.
The Asia iTraxx investment-grade index excluding Japan narrowed to 193/198 bps from 200/205, on optimism about second quarter earnings in the United States, traders said. Alcoa Inc, which kicked off the earnings season in the US, posted a loss that was smaller than Wall Street estimates.
Following are the major movers in cash bonds and credit default swaps (CDS): Philippines' cash bonds gained, snapping four straight days of losses, with the country's 8.375 percent debt due in 2019 trading at 114.25/114.50 from 113.25/113.50 on Wednesday, as offshore investors covered short positions, a Manila-based trader said. The five-year CDS tightened to 220/230 bps from 230/250 bps. South Korea's five-year CDS narrowed to 185/195 bps, tracking gains in the overall market, traders said.
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