Please find attached our BNIS Fixed Income Daily Report of January 15, 2020.
Bond Market Review (Tue, 14/1)
Indonesia’s bond prices moved sideways in a narrow range yesterday. The government bond yield movements were mixed ranging between 1 – 4 bps along the curve, while the 10-year Government bond yield was relatively unchanged compared to the previous day’s closing of 6.84%. The IDR was little changed and being closed at IDR13,680/USD yesterday, compared to Monday’s closing level of IDR13,673/USD.
The outright trading volume of Government securities was recorded at IDR22.7 trillion yesterday, increasing from Monday’s trading volume of IDR22.4 trillion, and also higher than the year-to-date average daily trading volume of IDR18.8 trillion. FR0056 and FR0077 were the two most actively-traded series in secondary market, with the trading volume of IDR3.5 trillion and IDR2.6 trillion, respectively. Meanwhile, the outright trading volume of corporate bond was recorded at IDR1.3 trillion yesterday.
Bond Market Preview (Tue, 14/1)
Indonesia’s bond yields are expected to move sideways in near term along with the mixed catalyst from external. Global investors’ worries increased after Bloomberg reported that existing US import tariffs on Chinese goods will likely stay in place until after the presidential election. However, on the flip side, better-than-expected 4Q19 earnings from JPMorgan Chase, Citigroup, and Delta Air Lines became a positive sentiment to the global market. Meanwhile, US inflation came at 0.2% MoM and 2.3% YoY in December 2019, lower than Bloomberg consensus expectation of 0.3% MoM and 2.4% YoY, raising investors’ optimism that The Fed may keep its interest rates unchanged for foreseeable future. Those sentiments triggered the mixed movement on the US stock market (Dow Jones +0.11%; S&P 500 -0.15%; Nasdaq -0.24%) last night. Meanwhile, the 10-year and 30-year US Treasury yields fell to 1.81% (-4 bps) and 2.27% (-3 bps), respectively. The mixed external catalyst may also open the possibility of sideways yield movement on Indonesia’s bond market. Given the current level of inflation, 7DRRR, USDIDR, CDS, and the 10-year US Treasury yield, our yield model shows that the fair yield for the 10-year Government bonds is 6.86%, relatively in line with the current level. Hence, it may also support the likelihood of sideways yield movement in near term. Yet, the potential of further declines on Indonesia’s bond yields are still relatively open in medium term along with the robust market liquidity in early this year.
Along with the potential of sideways market movement in near term, then, the short-term trading strategy on the Government bonds with the higher market liquidity, such as FR0081, FR0082, FR0080, and FR0083 may become an attractive option for investors.
Indonesia Bond Market News
Indonesia Government has successfully issued IDR7.0 trillion of Sukuk through yesterday’s sukuk auctionin line with its indicative target. Total investors’ bid on yesterday’s auction reached IDR59.1 trillion, the highest bid ever on Sukuk auctions, and also much higher than the average bid in 2019 sukuk auctions of IDR23.6 trillion. In line with the sukuk auctions in 2019, investors’ demand was still stronger on the short-end series, which can be spotted from robust demand on SPNS15072020 and PBS002 which reached IDR21.2 trillion and IDR22.2 trillion, respectively, on yesterday’s auction. Following yesterday’s sukuk auction, year-to-date, Government has successfully issued IDR70.3 trillion of securities.
PEFINDO rating agency has affirmed its idAAA ratings for PT Adira Dinamika Multi Finance Tbk (ADMF) and the company’s outstanding conventional bonds.PEFINDO has also affirmed the rating of idAAA(sy) for ADMF’s outstanding sukuk. The outlook for the corporate credit rating is stable. ADMF’s Shelf Registration Bond IV Phase II 2018 series B, Shelf Registration Bond III Phase V 2017 series B, and Shelf Registration Sukuk Mudharabah II Phase III 2017 series B amounting to IDR80.0 billion, IDR860.0 billion and IDR105.0 billion, respectively, will mature on March 21, 2020, March 22, 2020, and March 22, 2020. The Company’s readiness to repay its maturing bonds and sukuk is supported by its cash and cash equivalent of IDR1.9 trillion at the end of September 2019, and financing receivable collections of IDR3.7 trillion per month. According to PEFINDO, the rating reflects ADMF’s very strong synergy and mutual relationship with its parent, its very strong market position in the automotive financing industry, and a well-diversified business portfolio. Yet, the rating is still constrained by pressure on its asset quality.