Please find attached our BNIS Fixed Income Daily Report of May 17, 2019.
Bond Market Review (Thu, 16/5)
Indonesia’s bond market advanced slightly yesterday along with easing external pressures. Most of the Government yields decreased by 1-4 bps along the curve, in which the 10-year government bond yield fell 2 bps to 7.98%. The IDR strengthened slightly to IDR14,452/USD yesterday, compared to the previous day’s closing level of IDR14,463 /USD.
Investors’ activity in secondary market was still relatively low, in which the outright trading volume of Government securities was only recorded at IDR9.4 trillion yesterday, lower than the year-to-date average daily trading volume of IDR14.4 trillion. FR0077 and FR0061 were the two most actively-traded series in secondary market, with the trading volume of IDR1.7 trillion and IDR1.3 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR951.0 billion yesterday.
Bond Market Preview (Fri, 17/5)
Another upside movement is still expected to take place on Indonesia’s bond market in near term. Global market pressure eased as investors tend to ignore the trade war issue between US and China, and they focused on the several economic data releases. The US housing starts and building permits data in April as well as initial jobless claims on May 11, came better-than-expected. This was increasing investors’ optimism on the US economy, spurring investors to enter the riskier asasets, reducing demand on the safe-haven assets. Which can be seen from the strengthening of US and European stock markets (Dow Jones +0.84%; FTSE100 +0.78%; DAX +1.74%) last night, which was also followed by increasing the 10-year US Treasury yield by 3 bps to 2.40%. The easing pressure from the global market may also bring a positive impact to Indonesia’s bond market and opening the room for further decline on Indonesia’s bond yields in near term. However, the significant decline of Indonesia’s bond yields is expected to be curbed by the likelihood of higher market volatility on the next few days along with higher uncertainty on the trade war issue. The trade tension between US and China may increase going forward after The US President, Donald Trump, on Wednesday declared a national emergency over threats against American technology and it was followed by the addition of Huawei Technologies and its affiliates to the Bureau of Industry and Security (BIS) Entity List, making it more difficult for the Chinese telecom giant to conduct business with US companies.
Along with the potential of further market strengthening in near term, yet, the market volatility is still expected to remain high, then, the short-term trading strategy on several Government bonds such as FR0077, FR0056, FR0078, FR0058, FR0074, FR0065, FR0068, and FR0079 may still become an attractive option for investors.
Economics and Indonesia Bond Market News
Bank Indonesia kept its benchmark interest rate, 7-day Reverse Repo, unchanged at 6.00% on yesterday’s Board meeting. Bank Indonesia also maintained its deposit and lending facility unchanged at 5.25% and 6.75%, respectively. Bank Indonesia stated that the decision is still consistent with the Central Bank‘s efforts to maintain external stability along with increasing global financial market uncertainty. The Central Bank will also look at the global market condition and external stability in order to consider the room for accomodative monetary policy amid subdued inflation and the needs to spur economic growth. Bank Indonesia continues to ensure the availability of banking liquidity and hold accommodative macroprudential policies by maintaining a Countercyclical Capital Buffer (CCB) at 0%, Macroprudential Liquidity Buffer (PLM) ratio at 4% with a repo flexibility of 4%, an the Macroprudential Intermediation Ratio (RIM) ranging between 84% – 94%. Furthermore, Bank Indonesia will also consistently strengthen the coordination with the Government and relevant authorities to maintain economic stability, spurring domestic demand, as well as increasing exports, tourism, and foreign fund inflows.
PT Wahana Ottomitra Multiartha offers a coupon up to 9.85% for the issuance of Shelf Registration Bond III Phase II 2019 totaling up to IDR1.675 trillion. The bonds will be issued in three series i.e., the 370-day A series with a coupon of 8.50% will be issued worth of IDR931.5 billion, the 2-year B series with a coupon of 9.15% will be sold as much as IDR125.5 billion, and the 3-year C series with a coupon of 9.85% will be issued as much as IDR618.0 billion. This bond issuance is a part of shelf registration bond III issuance which is targeted as much as IDR5.0 trillion. The public offering period will be held on May 23-24, 2019, while the electronic distribution and listing on IDX will be conducted on May 29 and May 31, 2019, respectively.
PT Sarana Multi Infrastruktur (Persero) offers an indicative coupon between 7.00% – 9.25% for the company’s bond issuance plan, namely, Shelf Registration Bond II SMI Phase I 2019 totaling to IDR3.0 trillion. The bonds will be issued in three series, i.e., the 370-day series A offers an indicative coupon of 7.00% – 7.75%, the 3-year series B with the indicative coupon of 8.00% – 8.85%, and the 5-year series C offers an indicative coupon of 8.25% – 9.25%. PEFINDO rating agency has affirmed the rating of idAAA for the company’s bonds. The proceeds from the bonds issuance will be used for company’s infrastructure project financing activities. The book building period will be held on May 15 – 27, 2019, public offering period will be conducted on June 18 – 20, 2019, and the bonds will be listed in IDX on June 26, 2019.