BNIS Fixed Income Daily Report of December 2, 2019.
Bond Market Review (Fri, 29/11)
Indonesia’s bond prices declined on the final trading day of last week. Most of the government bond yields increased by about 1 – 6 bps along the curve, in which, the 10-year Government bond yield jumped 6 bps to 7.09%. The IDR weakened to IDR14,108/USD on Friday, compared to the previous day’s closing level of IDR14,092 /USD.
The outright trading volume of Government securities was only recorded at IDR9.4 trillion on Friday, declining from the previous day’s trading volume of IDR10.2 trillion, and lower than year-to-date average daily trading volume of IDR13.8 trillion. FR0078 and FR0077 were two most actively-traded series in secondary market yesterday, with the trading volume of IDR2.0 trillion and IDR1.4 trillion, respectively. Meanwhile, the outright trading volume of corporate bond was recorded at IDR1.8 trillion yesterday.
Bond Market Preview (Mon, 2/12)
Indonesia’s bond yields are expected to continue its sideways trend early this week. The global market participants stood on the sidelines, awaiting a concrete trade deal between US and China amid higher uncertainties on the US – China relations. Investors’ pessimism increased on the US – China relation after the US President, Donald Trump, sign two bills which is supporting protesters in Hong Kong. Those sentiment dragged the US stock market down on last week’s final trading day (Dow Jones -0,40%; S&P 500 -0,40%; Nasdaq -0,46%). The higher global pressure and uncertainties may also limit the likelihood of declining Indonesia’s bond yields early this week. However, on the flip side, the possibility of increasing Indonesia’s bond yields may be curbed by the subdued and manageable inflation. Indonesian Statistics Agency (BPS) will release inflation data today, in which the Bloomberg consensus expect Indonesia’s CPI to come at 0.20% MoM and 3.06% YoY in November 2019. Furthermore, the potential of higher bond yields may also be limited by easing supply pressure of Government securities after Indonesia Government canceled its bond and sukuk auctions which was previously scheduled in December as the securities issuance in 2019 has met the Government target.
Along with the potential of sideways market movement, then, short-term trading strategy may remain attractive for investors. Several Government bonds with the higher liquidity in secondary market such as FR0077, FR0081, FR0078, FR0082, FR0080, and FR0083 can be an alternative choice for trading.
Indonesia Bond Market News
PEFINDO rating agency has affirmed the rating of idA for PT Danareksa (Persero) and the company’s shelf registration bond I phase II 2014 series B. The IDR250 billion bonds will mature on December 16, 2019. The outlook for the corporate rating is stable. According to PEFINDO, corporate rating reflects the Company’s strong support from Indonesian Government, moderate capitalization, and adequate liquidity and financial flexibility. However, the rating is still constrained by the company’s below average profitability as well as volatile nature of the capital market. PEFINDO also stated that the rating may be upgraded if the strategic holding company plan materializes through the issuance of a government regulation (Peraturan Pemerintah/PP). The company’s new portfolio of investments, however, should consist of companies that have stronger credit profiles than its existing operating subsidiaries. On the flip side, the rating may be downgraded if the company’s financial profile declines further, especially its profitability indicators. Additionally, the rating may be under pressure if its transformation into a holding company of state-owned banking & financial institutions is cancelled.
PT Perusahaan Pengelola Aset (Persero) has successfully issued Commercial Paper (CP) totaling to IDR100.0 billion. This CP was issued in the form of 12-month paper with a coupon of 7.50%. PT Perusahaan Pengelola Aset (Persero) is the second company which issued CP in 2019, after previously PT Sarana Multigriya Financial also issued its CP in November. The lower cost of fund amid declining JIBOR becomes one of the driver for Indonesian Companies to issue CP. Following this CP issuance, total outstanding of CP has reached IDR220.0 billion, currently.