Please find attached our BNIS Fixed Income Daily Report of February 12, 2019.
Bond Market Review (Mon, 11/2)
Indonesia’s bond prices moved lower on the first trading day of this week amid higher pressure from external. Most of Government bond yields climbed by about 2 – 10 bps, in which the 10-year Government bond yield closed 8 bps higher to 7.92%. The IDR currency weakened to IDR14,034/USD yesterday, compared to Friday’s closing of IDR13,955/USD.
Investors’ activity in the secondary market is still relatively low. This can be spotted from the outright trading volume of Government securities market which recorded at IDR12.5 trillion today, lower than year-to-date daily average trading volume of IDR14.9 trillion. FR0078 and FR0077 were the two most actively traded series in secondary market, with the trading volume of IDR2.5 trillion and IDR1.8 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds reached IDR625.7 billion yesterday.
Bond Market Preview (Tue, 12/2)
Indonesia’s bond market is expected to move sideways along with mixed catalyst from external and domestic. Market focus is largely attuned to global trade developments between US and China, in which delegations from the two countries will meet later this week for the next round of negotiations. Meanwhile, There is also a growing focus by global market participants on a potential second US government shutdown. Democrats and Republicans remain at odds over border policy and the likelihood of federal government shutdown is relatively open if the two parties don’t reach an agreement by end of Friday. Those sentiment triggered the global market to move in mixed pattern last night, in which the US Dow Jones index declined 53.2 points (-0.21%), while the European stock markets strengthened (FTSE100 +0.82%; DAX +0.99%). Meanwhile, the 10-year US Government bond yield rose 2 bps to 2.65%. The mixed catalyst from external may also spur investor in Indonesia’s bond market to remain stand on the sidelines. Additionally, investors are also expected to focus on today’s Government bond auction. If the auction is success with strong investors’ demand and the Government is able to issue bond in line with the indicative target, then, it may become a positive catalyst for Indonesia’s bond market.
Along with the likelihood of the sideways market movement, then, several benchmark series of Government bond such as FR0077, FR0078, FR0068, and FR0079 may still become an attractive series for investors. Today’s bond auction also can be utilized by market participants as a momentum to enter the market as the Government will offer bechmark series on this auction.
Economics and Indonesia Bond Market News
Indonesian Government will conduct another bond auction today, with the indicative target of IDR15.0 trillion. On today’s auction, the Government will offer seven series of bonds i.e, SPN03190513, SPN12200213, FR0077, FR0078, FR0068, FR0079, and FR0076. Investors’ demand are expected to remain robust on this auction amid a more attractive yield offered in domestic market as well as various series offered by the Government. Along with the possibility of strong investors’ demand, we believe that the Government will be able to issue bonds in line with the indicative target. Even, the possibility of higher issuance than its target is relatively open if investors’ bid yields are relatively low, as can be seen on the first three bond auctions in 2019, where the Government has successfully issued by average of IDR26.4 trillion of bonds per auction. Taking into account the market condition on the last few days, we expect the yields indicative for today’s auction are as follow :
SPN03190513 : 5.90% – 6.00%
SPN12200213 : 6.15% – 6.30%
FR0077 : 7.73% – 7.83%
FR0078 : 7.86% – 7.96%
FR0068 : 8.11% – 8.21%
FR0079 : 8.20% – 8.30%
FR0076 : 8.77% – 8.87%
PT Bank Danamon Indonesia plans to issue IDR500.0 billion of medium term notes (MTN). The 1-year MTN will be offered with an indicative coupon of 7.75% – 8.45% per annum. PEFINDO rating agency has assigned the rating of idAAA for this MTN. This MTN issuance will also add the MTN issuance this year which is recorded at IDR1,4 trillion year-to-date.