Please find attached our BNIS Fixed Income Daily Report of October 10, 2019.
Bond Market Review (Wed, 9/10)
Indonesia’s bond market extended its sideways trend yesterday along with the mixed catalyst from external and domestic. Most maturities along the government yield curve were little changed, in which, the 10-year Government bond yield rose 2 bps to 7.25%. The IDR weakened slightly to IDR14,173/USD yesterday, compared to the previous day’s closing level of IDR14,162/USD.
The outright trading volume of Government securities was recorded at IDR11.8 trillion yesterday, declining from the previous day’s trading volume of IDR16.4 trillion, and lower than the year-to-date average daily trading volume of IDR13.9 trillion. FR0078 and FR0077 were the two most actively-traded series in secondary market, with the trading volume of IDR2.3 trillion and IDR1.9 trillion, respectively. Meanwhile, the outright trading volume of corporate bond was recorded at IDR1.3 trillion yesterday.
Bond Market Preview (Wed, 9/10)
Indonesia’s bond yields are expected to extend its sideways movement in near term. The global market volatility persisted amid increasing uncertainty on the US – China trade relationship. The Bloomberg News reported that China is preparing to accept a partial trade deal as long as no more import tariffs are imposed by US. Meanwhile, the Financial Times reported that China’s officials are offering to increase purchases of US agricultural products as an effort to reach a partial deal. Yet, on the flip side, South China Morning Post reported that the US and China made no progress in deputy level trade talks. In addition, the China delegation is planning to leave Washington on Thursday, instead of Friday as planned before. Meanwhile, the minutes from September’s Fed meeting which was released last night, showed that the trade war remains a concern for Fed officials. Still, The Fed’s officials think that the market may be overly optimistic about the central bank’s aggressiveness to cut its benchmark interest rate further. The mixed sentiments of the global market may also limit the yield movement on Indonesia’s bond market in near term. Furthermore, the chance of less aggressive stance from investors in the secondary market may also curb the Indonesia’s bond yields movement.
Along with the potential of sideways market movement, then, short-term trading strategy on several Government bonds such as FR0077, FR0081, FR0078, FR0082, FR0068, FR0080, and FR0079 may remain attractive to become investors choice.
Indonesia Bond Market News
PEFINDO rating agency has affirmed the rating of idA+ for PT Bank Pembangunan Daerah Sulawesi Selatan & Sulawesi Barat (Bank Sulselbar), its Shelf Registration Bond I 2016, and shelf registration bond II 2018. PEFINDO also affirmed the rating of idA+(sy) for Sukuk Mudharabah II Bank Sulselbar 2016. The outlook for the corporate rating is stable. According to PEFINDO, the rating reflects Bank Sulselbar’s strong captive market in the provinces of South Sulawesi and West Sulawesi, very strong asset quality indicators, and very strong capitalization profile. However, the rating is still constrained by the company’s concentrated funding from regional government and institutions, as well as the tightening competition in the productive loan segment. Moreover, PEFINDO also stated that the rating may be upgraded if Bank Sulselbar significantly strengthens its business position and funding structure on a consistent basis, while maintaining its very strong financial performance. On the flip side, the rating may be downgraded if there is a material decline in its capitalization and asset quality profiles.
PT Astra Sedaya Finance offers a coupon up to 7.95% for the issuance of Shelf Registration Bond IV Astra Sedaya Finance Phase III 2019 totaling to IDR2.0 trillion. The bonds will be issued in three series i.e., the 370-day A series with a coupon of 6.65% will be issued as much as IDR520.18 billion, the 3-year B series with a coupon of 7.70% will be sold worth of IDR800.38 billion, and the 5-year C series with a coupon of 7.95% will be sold worth of IDR236.16 billion. The remaining IDR443.29 billion will be sold with best effort scheme. The bond issuance is part of Shelf Registration Bond IV, with issuance target of IDR8.0 trillion. Fitch Rating Indonesia has assigned the rating of AAA(idn) for this bond. The public offering period will be held on October 17-18, 2019. Meanwhile, the bonds will be electronically distributed and listed in IDX on October 23 and 24, 2019, respectively.
PT Bussan Auto Finance will issue Bussan Auto Finance Bond III 2019 at the maximum size of IDR1.5 trillion. The bonds will be issued in the form of 370-day and 3-year papers. PEFINDO rating agency has affirmed the rating of idAA for the company’s the bonds. The proceeds from this bond issuance will be used for company’s working capital. The book building period will be held until October 22, 2019. The public offering period will be conducted on November 4-5, 2019. Meanwhile the bonds will be electronically distributed and listed in IDX on November 8 and 11, 2019, respectively. The bonds from PT Bussan Auto Finance will add the corporate bond issuance this year, especially from Multifinance sector, which is recorded at IDR20.7 trillion currently, or about 22.7% from year-to-date total corporate issuance of IDR91.5 trillion.