Please find attached our BNIS Fixed Income Daily Report of May 14, 2020.
Bond Market Review (Wed, 13/5)
Indonesia’s bond market extended its gains yesterday. Most of the government bond yields declined by about 3 – 10 bps along the curve, in which the 10-year Government bond yield fell 6 bps to 7.85%. The IDR strengthened to IDR14,865/USD yesterday, compared to Tuesday’s closing level of IDR14,905/USD.
The outright trading volume of Government securities was recorded at IDR15.5 trillion yesterday, increasing from Tuesday’s trading volume of IDR14.4 trillion, and higher than the month-to-date average daily trading volume of IDR14.3 trillion. FR0081 and FR0082 were the two most actively-traded series in the secondary market, with the trading volume of IDR3.6 trillion and IDR2.8 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR1.2 trillion yesterday.
Bond Market Preview (Thu, 14/5)
Indonesia’s bond market volatility is expected to persist in the near term amid increasing global market volatility and uncertainty. The external pressure increased after The Fed Chairman, Jerome Powel, warned of a significant downside risk going forward amid the coronavirus pandemic and more stimulus may be needed to help the US economy out of the downturn. Meanwhile, the US Producer Price Index (PPI) was recorded at -1.3% MoM in April 2020, lower than Bloomberg consensus expectation of -0.5% MoM. This data came after the declining Consumer Price Index (CPI) in April, which was recorded at-0.8% MoM. The higher external pressure triggered the market participants to enter the safe-haven assets, reducing demand on the riskier assets, which can be spotted from the weakening US stock market last night (Dow Jones -2.17%; S&P 500 -1.75%; Nasdaq -1.55%), which was also followed by declining the 10-year and 30-year US Treasury yields to 0.65% (-2 bps) and 1.35% (-2 bps). Those sentiments are also expected to curb the room for further yield declines on Indonesia’s bond market after showing a downside trend during the last four trading days. However, on the flip side, the possibility of significant increase on Indonesia’s bond yields are also expected to be curbed by the Government and Bank Indonesia’s efforts to minimize the impact of this pandemic to the economy.
As the market volatility persists, then, the short-end and the belly series of Government bonds such as FR0053, FR0061, FR0063, FR0070, FR0077, FR0064, FR0071, and FR0078 may remain attractive for investors.
Indonesia Bond Market News
Indonesia Government plans to conduct a sukuk auction on Monday, May 18, 2020, with the indicative target of IDR7.0 trillion. On the next week’s auction, the Government will offer six series of Sukuk i.e., SPNS19112020, PBS002, PBS026, PBS023, PBS004, and PBS005. Investors’ appetite is expected to remain moderate amid lingering global market volatility. Yet, the Government is still expected to be able to issue sukuk in line with its indicative target on next week’s auction. Year-to-date, the Government has successfully issued IDR72.7 trillion of sukuk through the sukuk auctions.
PT Indah Kiat Pulp & Paper Tbk (INKP) will issue Shelf Registration Bonds I Phase I 2020 amounting to IDR3.0 trillion. The bonds will be issued in three series i.e., the 370-day series A with the indicative coupon of 8.50% – 8.75%, the 3-year series B with the indicative coupon of 10.00% – 10.25%, and the 5-year series C with the indicative coupon of 10.50% – 11.00%. About 60% of the proceeds from this issuance will be used for refinancing, and the remaining 40% will be used for working capital. PEFINDO rating agency has assigned the idA+ rating for the bonds. The bookbuilding period will be held until May 14, 2020, while the electronic distribution will be conducted on June 4, 2020.
PT Toyota Astra Financial Services offers a coupon up to 8.25% for the issuance of Shelf Registration Bond III Phase I 2020 totaling to IDR745.05 billion. The bonds will be issued in two series i.e., the 370-day series A with a coupon of 7.10% will be issued as much as IDR206.0 billion, and the 3-year series B with a coupon of 8.25% will be sold as much as IDR539.05 billion. This issuance is a part of Shelf Registration Bond III with a total issuance target of IDR5.0 trillion. Fitch rating agency has assigned the rating of AAA(idn) for the company’s bonds. The public offering period will be held until May 14, 2020, while the electronic distribution and IDX listing will be conducted on May 19 and 20, 2020 respectively.