BNIS Fixed Income Daily Report of December 27, 2018.
Bond Market Review (Wed, 26/12)
Indonesia’s bond prices declined slightly on the first trading day of this week along with increasing external pressure. Most of the Government bond yields climbed by about 2 – 4 bps, in which the 10-year Government bond yield rose 3 bps to 7.96%. IDR currency extended its weakening and it was closed at IDR14,577/USD yesterday, compared to the last week’s closing of IDR14,553/USD.
Investors activity in secondary market was more limited, in which the outright trading volume of Government securities was only recorded at IDR5.8 trillion yesterday, lower than the Friday’s trading volume of IDR6.8 trillion. FR0053 and FR0063 were the two most actively traded series in secondary market, with the trading volume of IDR620.0 billion and IDR572.0 billion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR992.3 billion yesterday.
Bond Market Preview (Thu, 27/12)
Indonesia’s bond prices are expected to strengthen slightly today along with easing external pressure. Global market pressure eased as a top US Government economic adviser said that President Donald Trump won’t try to fire Federal Reserve Chairman Jerome Powell. In addition, Trump, also said yesterday, that he retained confidence in Powell and The Federal Reserve despite the Fed was increasing interest rates too fast. Another positive catalyst came from the meeting plan from US and China delegation in Beijing next week, in order to talk about the trade relationship between the two countries. Those sentiments was responded positively by global market participants, spurring investors to enter the riskier assets and reducing demand on the safe-haven assets. This can be spotted from the significant strengthen of US stock markets, in which the Dow Jones index skyrocketing by 1086 points or 4.98% last night, its largest one-day point gain in history. Meanwhile, on the flip side, the 10-year US Treasury yield climbed 7 bps to 2.81%. The increasing global investors’ optimism is also expected to bring a positive catalyst to Indonesia’s bond market, opening the potential of declining yields in near term. However, the possibility of significant decline on Indonesia’s bond yields may be limited by the chance of less aggressive stance from investors on the last two trading days in 2018.
Along with the potential of market strengthening, then, several Government bonds such as FR0053, FR0061, FR0077, FR0078, FR0052, and FR0068 may become an attractive choice for investors.
Economics and Indonesia Bond Market News
Indonesian Government will conduct the first bond auction in 2019, on Thursday, January 3, 2019, with the indicative target of IDR15.0 trillion. On the next week’s bond auction, Government will offer six series of bonds i.e, SPN03190406, SPN12200106, FR0077, FR0078, FR0068, and FR0079. The SPN03190406, SPN12200106, and FR0079 are the three new series which will be issued for the first time next week. FR0079 which will mature on April 15, 2039, is predicted to become benchmark series for 20-year series in 2019, meanwhile, the FR0068 may become a benchmark series for 15-year Government bond next year. The potential demand from investors on next week auction is expected to remain strong along with higher liquidity in early year. The Government’s action to offer a benchmark series may also increase investors’ participation on the auction in early 2019. Along with the the possibility of stronger demand from investors, Government is expected to be able to issue bonds in line with the indicative target. Even, if the investors’ bid yields are relatively in line with the yields in the secondary market, then, the Government may be able to issue at the maximum size allowed of IDR30.0 trillion.
PEFINDO rating agency has affirmed the rating of idA+(sy)(cg) for MNC Pictures’ Medium Term Notes Syariah Ijarah I 2018 amounting to IDR450.0 billion which will mature on February 10, 2019. This MTN is fully guaranteed by PT Global Mediacom Tbk (BMTR), the holding company of the Media Nusantara Citra (MNC) group for media business. MNC Pictures plans to repay its MTN using the initial public offering (IPO) proceeds from PT MNC Studios International Tbk (MSIN) and MNC Pictures’ internal cash. As of November 30, 2018, MSIN had a cash deposit account of around IDR410.0 billion which was allocated to repay MNC Pictures maturing MTN, while the remaining MTN outstanding will be repaid using the company’s internal cash and its fourth quarter EBITDA which is projected to be around IDR75.0 billion. In the first nine months 2018, the company’s quarterly EBITDA was recorded at IDR76.3 billion on average. MNC Pictures is a production house that produces content for TV in form of drama series, film television (FTV), animation, as well as movies. As of September 30, 2018, the company’s shareholders were PT MNC Studios International Tbk (MSIN) with the ownership of 99.9%, while the remaining 0.01% were owned by PT Media Nusantara Citra Tbk (MNCN).