BNIS Fixed Income Daily Report of November 29, 2019.
Bond Market Review (Thu, 28/11)
Indonesia’s bond prices extended its sideways movement yesterday. The government bond yield movements were mixed ranging between 1 – 3 bps along the curve, in which the 10-year Government bond yield declined slightly 3 bps to 7.03%. The IDR was closed at IDR14,092/USD yesterday, relatively unchanged compared to the previous day’s closing level of IDR14,095 /USD.
The sideways market movement was also underpinned by lower investors’ activities, in which the outright trading volume of Government securities only reached IDR10.2 trillion yesterday, decreasing from the previous day’s trading volume of IDR13.7 trillion. Meanwhile, the month-to-date average daily trading volume was only recorded at IDR12.5 trillion, lower than the year-to-date average daily trading volume of IDR13.8 trillion. FR0082 and PBS015 were two most actively-traded series in secondary market yesterday, with the trading volume of IDR1.7 trillion and IDR1.3 trillion, respectively. Meanwhile, the outright trading volume of corporate bond was recorded at IDR2.9 trillion yesterday.
Bond Market Preview (Fri, 29/11)
Indonesia’s bond yields are expected to extend its sideways movement on the final trading day of this month. Global market pressure increased following higher investors’ fears on the prospect of US – China relations. The US President, Donald Trump, signed into law bills backing protesters in Hong Kong. China’s Ministry of Foreign Affairs subsequently slammed the move and it would take firm counter-measures if the US continued to interfere in Hong Kong. Those sentiment dragged the European stock markets down last night (DAX -0,31%; FTSE 100 -0,18%), while US stock market was closed for the Thanksgiving holiday. Increasing external pressure may also affect Indonesia’s bond market, curbing a possibility of declining yields on Indonesian bonds. However, on the flip side, the likelihood of increasing domestic bond yields may be also limited amid subdued and manageable inflation as well as stable IDR movement. The IDR only moved ranging between 14,015 – 14,095/USD during the last three weeks amid robust foreign fund inflows to Government securities. Month-to-date, foreign investors have posted a net buy of IDR10.75 trillion in Government securities, extending its buying action in September and October of IDR19.79 trillion and IDR29.08 trillion, respectively.
Along with the potential of sideways market movement, then, short-term trading strategy may become a more attractive option for investors. Several Government bonds such as FR0077, FR0081, FR0082, FR0078, FR0080, FR0079, and FR0083 will become an attractive choice for trading due to stronger liquidity of these series in secondary market.
Indonesia Bond Market News
PEFINDO rating agency has affirmed the rating of idAAA for PT Indonesia Infrastructure Finance (IIF) and the company’s bond I 2016 series B and C. In addition, PEFINDO has also assigned the rating of idAAA for Shelf Registration I IIF 2019 with the maximum amount issuance of IDR3.0 trillion. The outlook for the corporate credit rating is stable. According to PEFINDO, the corporate rating reflects IIF’s very strong support from its shareholders, important role in Indonesia’s infrastructure development, strong liquidity and financial flexibility, as well as strong capitalization profile. Yet, the rating is constrained by the limited infrastructure projects that meet both commercial as well as social and environmental criteria. Another constrained is the company’s concentrated financing profile due to its focus and mandate in infrastructure sector. Moreover, the rating could be downgraded if there is a material reduction in support from its parent, which may result from a significant decline in IIF’s business and asset quality profiles.
Medium Term Notes (MTN) issuance was recorded at IDR2.3 trillion during November 2019. This month’s issuance is higher than previous month’s issuance of only IDR1.9 trillion. Meanwhile, the year-to-date MTN issuance has reached IDR22.3 trillion. Property sector dominates the issuance with issuance volume of IDR7.3 trillion, or 33% of total MTN issuance, followed by Financial Institution (non bank), Agriculture, and Basic Industry sectors, with the issuance volume of IDR3.8 trillion (17%), IDR2.9 trillion (13%), and IDR2.9 trillion (12%). Going forward, we expect that the MTN issuance will remain robust amid favorable domestic economic condition as well as company’s refinancing motives for its maturing MTN.