BNIS Fixed Income Daily Report of March 13, 2019.
Bond Market Review (Tue, 12/3)
Indonesia’s bond prices extended its gains yesterday along with easing external pressure. The government bond yields fell 2-6 bps across the board, while the 10-year Government bond yield declined 6 bps to 7.85%. The IDR currency strengthened to IDR14,267/USD yesterday, compared to Monday’s closing level of IDR14,291 /USD.
The strengthening bond prices was also supported by increasing investors’ activity in the secondary market, in which the outright trading volume of Government securities was recorded at IDR20.8 trillion yesterday, increasing from the previous day’s trading volume of IDR14.1 trillion, and also higher than year-to-date average daily trading volume of IDR14.8 trillion. FR0077 dan FR0078 were the two most actively traded series in secondary market, with the trading volume of IDR4.3 trillion and IDR3.6 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR1.6 trillion yesterday.
Bond Market Preview (Wed, 13/3)
The positive trend on Indonesia’s bond market is expected to continue in near term along with increasing global optimism. The global market participants expect that the US Central Bank to keep its benchmark interest rate unchanged going forward as the US inflation remains in check, in which the February’s CPI came at 1.5% YoY, lower than previous month’s figure of 1.6% YoY. Higher expectation on the dovish stance from The Federal Reserve on its monetary policy also dragged the 10-year US Treasury down by 4 bps to reach 2.60% last night. This may also open the possibility of declining yields on Indonesia’s bond market. In addition, the strong investors’ appetite on Indonesia’s bond market amid attractive return offered, is also expected to become a positive catalyst for the market. The strong appetite from investors also can be spotted from yesterday’s bond auction, in which total investors’ bid reached IDR58.3 trillion, higher than average bids on 2018’s bond auction of only IDR42.4 trillion per auction. The solid appetite was not only come from domestic investors but also foreigners, where about 35.0% of total bids on yesterday’s auction belongs to foreign investors. Robust foreign investors’ appetite to the domestic market also can be seen from declining trend of Indonesia’s CDS as well as foreign investors net buy in Government securities which reached IDR51.3 trillion since early this year.
Along with the potential of further market strengthening, then, the belly and long-end series of Government bonds such as FR0077, FR0056, FR0078, FR0054, FR0058, FR0065, FR0068, and FR0079 may become an attractive choice for investors.
Economics and Indonesia Bond Market News
Indonesian Government has succeeded to issue IDR18.05 trillion of bonds through yesterday’s bond auction. Total investors’ bid on this auction reached IDR58.31 trillion, lower than average bid on the five previous bond auctions of IDR63.97 trillion. Despite lower than average investors’ bid on the five previous auctions, yesterday’s bid was still higher than average investors’ bid on 2018 bond auctions of IDR42.38 trillion per auction. Along with robust investors participation, Government managed to issue bonds higher than its indicative target of IDR15.0 trillion. Following yesterday’s bond auction, year-to-date, Government has successfully issued IDR275.09 trillion of securities or about 33.32% of 2019 securities issuance target.
PT Maybank Indonesia Finance offers a coupon up to 9.35% for the issuance of Shelf Registration Bond II Maybank Finance Phase II 2019 totaling to IDR1.0 trillion. The bonds will be issued in two series i.e, the 3-year A series with a coupon of 9.00% will be issued as much as IDR650.0 billion, and the 5-year B series with a coupon of 9.35% will be sold worth of IDR350.0 trillion. This issuance is a part of Shelf Registration Bond II with total issuances target of IDR5.0 trillion. The public offering period will be held on March 21-27, 2019, while the electronic distribution will be conducted on April 2, 2019 and the bonds will be listed in the IDX on April 4, 2019.