Please find attached our BNIS Fixed Income Daily Report of November 11, 2019.
Bond Market Review (Fri, 8/11)
Indonesia’s bond prices advanced on the final trading day of last week amid higher global optimism. Most of the government bond yields declined 1 – 5 bps along the curve, in which, the 10-year Government bond yield fell 3 bps to 6.95%. The IDR weakened slightly to IDR14,014/USD on Friday, compared to the previous day’s closing level of IDR13,998 /USD.
The market strengthening was also followed by increasing investor’s activity in secondary market, in which the outright trading volume of Government securities reached IDR16.9 trillion, increasing from the previous day’s trading volume of only IDR12.4 trillion, and higher than year-to-date average daily trading volume of IDR13.9 trillion. FR0080 and FR0078 were the two most actively-traded series in secondary market, with the trading volume of IDR3.7 trillion and IDR2.6 trillion, respectively. Meanwhile, the outright trading volume of corporate bond was recorded at IDR1.2 trillion on Friday.
Bond Market Preview (Mon, 11/11)
Indonesia’s bond market is expected to extend its gains early this week amid higher global investors’ optimism which spurred a massive rotation out of safe-haven assets to the riskier assets. The global investors were more sanguine on the US – China trade relations after a spokesperson for the Chinese Commerce Ministry said that China and the US had agreed to cancel existing tariffs in phases. Meanwhile, a US official also reportedly said both countries agreed to roll back the levies in tranches. This indicating that the two sides is closer to phase I trade deal. The higher investors’ optimism also can be spotted from the strengthening US stock market at the end of last week (Dow Jones +0.02%; S&P500 +0.26%; Nasdaq +0.48%), which was also followed by increasing the 2-year, 10-year, and 30-year US Treasury yields to 1.68% (+1 bps), 1.94% (+2 bps), and 2.43% (+3 bps), respectively. Those sentiments are also expected to add positive catalyst to Indonesia’s bond market. The likelihood of further upside movement on Indonesia’s bond market will also be supported by improving Indonesia’s Current Account Deficit (CAD). The 3Q19’s CAD was recorded at USD7.7 billion (2.7% of GDP), better than previous quarter of USD8.2 billion (2.9% of GDP). Moreover, the robust foreign appetite to domestic bond market may also open a room for further declines on Indonesia’s bond yields. During the first five trading days in November 2019, foreign investors have posted a net buy of IDR10.3 trillion in Government securities, extending a net buy of IDR29.1 trillion during October 2019.
Along with the potential of market strengthening in near term, then, several Government bonds such as FR0081, FR0082, FR0080, and FR0083 may become a more attractive choice for investors.
Indonesia Bond Market News
PEFINDO rating agency has affirmed the rating of idBBB to Bond I Kapuas Prima Coal 2018. The IDR4.6 billion series A bonds will mature on December 31, 2019, while the IDR26.0 billion series B bonds will mature on January 21, 2020. The company plans to pay its maturing bonds using its internal funds, in which, as of September 2019, the company’s cash and cash equivalent was recorded at IDR63.6 trillion. PT Kapuas Prima Coal Tbk (ZINC) which was established in 2005 is engaged in exploration and production activities for industrial metals such as zinc, lead, silver, and iron ore. As of June 30, 2019, the company’s shareholders were PT Sarana Inti Selaras (21,36%), Sim Anthony (15,13%), Kioe Nata (13,05%). Budimulio Utomo (10,54%), Haroen Soedjatmiko (9,57%), William (9,56%), and public (20,79%).
PT Barito Pacific Tbk (BRPT) will issue Shelf Registration Bond I Phase I 2019 totaling to IDR750.0 billion. The bonds will be issued in the form of 3-year and 5-year paper. This bond issuance is part of Shelf Registration Bond I, with total issuance target of IDR1.5 trillion. PEFINDO rating agency has affirmed its idA rating for the bonds. The bookbuilding period will be held on November 14-25, 2019, while the public offering period will be conducted at December 6-9, 2019. The bond issuance from BRPT will add the corporate bond issuance this year, which was recorded at IDR99.4 trillion in 10M19. Going forward, we expect that the corporate bond issuance to remain robust, along with the potential of further decline on Indonesia’s bond yields amid easing external pressure.