BNIS Fixed Income Daily Report of December 26, 2018
Bond Market Review (Fri, 21/12)
Indonesia’s bond prices extended its upside trend on the final trading day of last week. Most of the Government bond yields fell by about 1 – 5 bps, in which the 10-year Government bond yield was closed at 7.93%. IDR currency continued its weakening and it was closed at IDR14,553/USD on Friday, compared to the previous day’s closing of IDR14,473/USD.
Investors activity in secondary market was relatively limited, in which the outright trading volume of Government securities was only recorded at IDR6.8 trillion on Friday, lower than the Thursday’s trading volume of IDR9.5 trillion. FR0063 and FR0077 were the two most actively traded series in secondary market, with the trading volume of IDR984.0 billion and IDR885.0 billion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR1.9 trillion on the final day of last week.
Bond Market Preview (Wed, 26/12)
Increasing external pressure is expected to limit the possibility of further decline on Indonesia’s bond yields at the final week of 2018. Global market pressure increased amid increasing investor worries on the slowing US economic growth following the US Central Bank’s step to tighten its monetary policy which was seen too fast. On last week’s FOMC meeting, The Federal Reserve has increased its benchmark interest rate and it would continue to unwind its balance sheet at the current pace. The US President, Donald Trump, also critized the US central bank policy which too fast to increase its benchmark rate. These sentiments also added pressure on the global market. Another negative sentiment, came from the uncertainty on the resolution of US Government shutdown which has taken place since last Saturday. Those negative sentiments also spurred investor to enter the relative safety of US Government bonds, and reducing demand on the riskier assets, which was reflected from declining the 10-year US Treasury yield by 5 bps to 2.74%, which was also followed by US Dow Jone index by 653 points or -2.91% on Monday. The higher external pressure may also give an impact to Indonesia’s bond market in near term, then, it may also limit the potential of further decline in domestic bond yields. The likelihood of declining bond yields may be also curbed by the less aggressive stance from investors at the final trading week in 2018.
Along with the higher external pressure, then, short-end and the belly series of Government bonds such as FR0069, FR0053, FR0061, FR0063, FR0070, and FR0077 can be an alternative choice for investors.
Economics and Indonesia Bond Market News
PEFINDO rating agency has affirmed the rating of idAAA for the Class A EBA Certificates issued by KIK EBA Danareksa BTN 04 – KPR BTN (DBTN04) of IDR64.5 billion out of total outstanding pool of IDR136.5 billion as of the cut-off date October 31, 2018. According to PEFINDO, the rating reflects a favorable underlying loan profile, very strong profile of PT Bank Tabungan Negara (Persero) Tbk (BBTN) as the servicer, and credit enhancement in form of Class B EBA, as well as liquidity back up from PT Sarana Multigriya Finansial (Persero). However, on the flip side, the rating is constrained by a high NPL ratio and a potentially increased cash flow burden with a higher portion of a longer tenor A2 tranche.
PT Blambangan Foodpackers Indonesia issued USD-denominated medium term notes (MTN) with total issuance volume of USD3.26 million, or equal to IDR47.2 billion. The MTN under the name MTN USD Blambangan Foodpackers Indonesia I 2018 will mature in December 31, 2019, or has a tenor of 12 months. The MTN is offered with a coupon of 7% per annum. The MTN issuance from PT Blambangan Foodpackers Indonesia also extends the MTN issuance since the beginning of this year, especially from Basic Industry sector. Based on data from Indonesia Central Securities Depository, MTN which has been issued from basic Industry sector is recorded at IDR13.0 trillion, or about 44% of total MTN issuance which is recorded at IDR29.3 trillion.