Please find attached our BNIS Fixed Income Daily Report of December 28, 2018.
Bond Market Review (Thu, 27/12)
Indonesia’s bond prices advanced slightly yesterday along with increasing global optimism as well as the IDR strengthening. Most of the Government bond yields fell by about 1 – 4 bps, in which the 10-year Government bond yield declined 2 bps to 7.94%. IDR currency strengthened to IDR14,561/USD yesterday, compared to the previous day’s closing level of IDR14,577/USD.
Investors activity in secondary market increased, in which the outright trading volume of Government securities reached IDR9.1 trillion yesterday, higher than the Wednesday’s trading volume of only IDR5.8 trillion. FR0063 and FR0064 were the two most actively traded series in secondary market, with the trading volume of IDR1.8 trillion and IDR879.9 billion, respectively. Meanwhile, the outright trading volume of corporate bonds was only recorded at IDR730.5 billion yesterday.
Bond Market Preview (Fri, 28/12)
Indonesia’s bond yields are expected to move sideways in a narrow range at the final trading day in 2018. Global market volatility increased, which can be spotted from fluctuating US stock market last night, where the US Dow Jones index had declined by 611 points on intraday trading along with higher uncertainty on the trade war issue between US and China, as well as increasing investor worries on the potential of slowing global economic growth. However, during the final 90 minutes of last night trading, Dow Jones index rebounded, and skyrocketing by 871 points, hence, overall, Dow Jones index strengthened by 260 points or 1.14% from the previous day’s closing. Meanwhile, the 10-year US Treasury yield fell 4 bps to 2.77% last night. The higher global market volatility may also spur investors to be less aggressive in the Indonesia’s bond market, hence, it may also limit the yield movement on the domestic market. The market participants are also expected to stand on the sidelines at the final trading day of this year, and tend to be more focus on the next year trading.
Along with the potential of sideways market movement in near term, yet, the possibility of market strengthening is still relatively open in early next year, then, several Government bonds such as FR0053, FR0077, FR0078, FR0054, FR0058, and FR0068 may become an attractive choice for investors.
Economics and Indonesia Bond Market News
Indonesian Government targets to issue IDR185.0 trillion of securities through bonds and sukuk auctions in 1Q19. The 1Q19’s auction issuance target is lower than the 1Q18’s auction issuance target of IDR194.5 trillion. This target also lower than the securities issuance through auction in 1Q18 which reached IDR210.9 trillion. Along with the lower issuance target as well as the potential of higher investors’ demand in early year, Government is expected to be able to issue bonds and sukuk in line with the indicative target in 1Q19. Even, the likelihood of higher issuance is relatively open as the front-loading strategy which will be adopted by Government on its securities issuance in 2019. During 1Q19, Government plans to conduct seven times bond auctions and six times Sukuk auctions, in which the first bond auction will be held by January 3, 2019, and the first sukuk auction will be conducted on January 8, 2019.
PEFINDO rating agency has affirmed the rating of idAA for Shelf Registration bond I Mitra Adiperkasa (MAPI) 2014 Phase II Series B. The bonds with the nominal outstanding of IDR280.0 billion, will mature on February 20, 2019. The company plans to repay its maturing bond using its unused credit facilities. As of September 30, 2018, MAPI had cash and cash equivalent of IDR1.0 trillion, and unused credit facilities of more than IDR900.0 billion. According to PEFINDO, the rating reflects MAPI’s strong market position in the modern retail industry with diverse and strong retail concepts, its relatively diversified store locations, above average cash flow protection as well as conservative capital structure. However, on the flip side, the rating is still constrained by the company’s exposure to IDR depreciation against USD as well as the intense competition amid limited retail space in first tier cities.