BNIS Fixed Income Daily Report of April 7, 2020.
Bond Market Review (Mon, 6/4)
Indonesia’s bond prices extended its volatile session early this week amid lingering external pressure. Most of Government bond yields climbed 3 – 11 bps along the curve, in which the 10-year Government bond yield (FR0082) rose 6 bps to 8.15%. The IDR strengthened slightly to IDR16,413/USD yesterday, compared to Friday’s closing level of IDR16,430/USD
Investor’s activity in secondary market was relatively limited, in which the outright trading volume of Government securities only reached IDR10.9 trillion yesterday, declining from Friday’s trading volume of IDR11.2 trillion, and also lower than year-to-date average daily trading volume of IDR21.6 trillion. FR0061 and FR0070 were the two most actively-traded series in secondary market yesterday, with the trading volume of IDR1.7 trillion and IDR1.6 trillion. Meanwhile, the outright trading volume of corporate bond was recorded at IDR2.2 trillion yesterday.
Bond Market Preview (Tue, 7/4)
Indonesia’s bond market is expected to strengthen in the near term amid easing external pressure. The global market pressure eased along with a sign that the death toll of the coronavirus in several countries declined. The New York Governor said deaths were showing indications of hitting a plateau. Meanwhile, death tolls in Spain and Italy showed signs of easing. Furthermore, France also reported a continued leveling-off of cases. Those sentiments increased investors’ optimism that the peak in coronavirus cases globally could be reached soon. The easing external pressure also triggered global investors to enter the riskier assets, reducing demand on the safe-haven assets, which can be spotted from the strengthening US stock market last night (Dow Jones +7.73%; S&P 500 +7.03%; Nasdaq +7.33%), which was also followed by increasing the 10-year and 30-year US Treasury yields to 0.67% (+7 bps) and 1.28% (+7 bps), respectively. The easing external pressure was also reflected from the declining VIX index to 45.2, the lowest level in about two weeks. Along with easing external pressure, then, it may bring a positive impact to Indonesia’s bond market, opening the possibility of lower bond yields in the near term.
Given the likelihood of market strengthening, then, the belly and long-end series of Government bonds such as FR0070, FR0077, FR0081, FR0059, FR0064, FR0071, FR0082, FR0073, FR0080, FR0072, and FR0083 may become a more attractive choice for investors.
Indonesia Bond Market News
Indonesia Government will conduct Sukuk auction today, with the indicative target of IDR7.0 trillion. On today’s auction, Government will offer six series of Sukuk i.e., SPNS08102020, SPNS08012021, PBS002, PBS026, PBS004, and PBS005. Investors’ appetite is expected to be moderate due to global market volatility. However, the Government is still expected to be able to issue sukuk in line with its indicative target on this auction. Taking into account the market condition in recent days, we forecast the indicative yields on today’s auction are as follow :
SPNS08102020 : 3.00% – 3.20%
SPNS08012021 : 3.20% – 3.40%
PBS002 : 6.00% – 6.20%
PBS026 : 6.90% – 7.10%
PBS004 : 8.65% – 8.85%
PBS005 : 8.85% – 9.05%
PEFINDO rating agency has affirmed the rating of idAAA for PT Bank Mandiri Tbk (Bank Mandiri)’s maturing Shelf Registered Bond I Phase II 2017 Series D worth of IDR1.0 trillion due on June 15, 2020. The Bank’s readiness to repay its maturing bond is supported by its liquid assets in the form of placements in Bank Indonesia, which at end of February 2020 amounted to IDR21 trillion. Bank Mandiri is a state-owned commercial bank that provides an extensive range of corporate, commercial, SME, micro, consumer, international, and treasury banking products and services. It also delivers other financial services through its subsidiaries, which include AXA Mandiri Financial Services, Asuransi Jiwa InHealth Indonesia (rated idAA/stable), Mandiri Sekuritas, Bank Syariah Mandiri (rated idAA+/stable), Mandiri Tunas Finance (rated idAA+/stable), and Bank Mandiri Taspen (rated idAA/stable).