BNIS Fixed Income Daily Report of May 19, 2020.
Bond Market Review (Mon, 18/5)
Indonesia’s bond prices extended its gains early this week along with robust investors’ liquidity. The Government bond yields declined by 2 – 7 bps along the curve, in which the 10-year Government bond yield tumbled 6 bps to 7.70%. The IDR strengthened slightly to IDR14,850/USD yesterday, compared to Friday’s closing level of IDR14,860/USD.
The outright trading volume of Government securities reached IDR23.2 trillion yesterday, increasing from Friday’s trading volume of IDR13.1 trillion, and also higher than the year-to-date average daily trading volume of IDR19.2 trillion. FR0061 and FR0070 were the two most actively-traded series in the secondary market, with the trading volume of IDR3.9 trillion and IDR2.9 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR1.0 trillion yesterday.
Bond Market Preview (Tue, 19/5)
Indonesia’s bond yields are expected to decline in the near term along with higher global optimism. The global investors’ optimism increased following a positive result from phase one trial of a potential coronavirus vaccine by the US biotech company, Moderna. The company said that all 45 trial participants had developed coronavirus antibodies. Another positive sentiment came from the statement of The Fed Chairman, Jerome Powell, that there’s a lot more The Fed can do to help the economy. Powel also said that The Fed is not out of ammunition by a long shot and there’s really no limit to The Fed’s lending programs. Those sentiments were responded positively by the market participants, which can be spotted from the strengthening US stock market last night (Dow Jones +3.85%; S&P 500 +3.15%; Nasdaq +2.44%), which was also followed by increasing the 10-year and 30-year US Treasury yields by 9 bps and 11 bps to 0.73% and 1.44%, respectively, indicating that investors moved from the safe-haven assets to the riskier assets. Increasing global optimism may also open the possibility for Indonesia’s bond market strengthening in the near term. Additionally, the likelihood of declining Indonesia’s bond yields may also be supported by robust investors’ liquidity as well as the Government and Bank Indonesia’s steps to minimize the negative impact of the coronavirus pandemic to the economy.
Given the likelihood of market strengthening in the near term, then, the belly and long-end series of Government bonds such as FR0081, FR0064, FR0071, FR0082, FR0058, FR0074, FR0065, FR0080, and FR0083 will be a more attractive choice for investors.
Indonesia Bond Market News
Indonesia Government issued IDR9.50 trillion of Sukuk through yesterday’s sukuk auction, higher than its indicative target of IDR7.00 trillion. Total investors’ bids on yesterday’s auction reached IDR18.85 trillion, slightly higher than the previous sukuk auction of IDR18.11 trillion, yet, remained lower than average bid on nine previous sukuk auctions of IDR38.06 trillion. Investors’ appetite on the PBS002 and PBS026 series was higher than the other series, in which investors’ bids on these series reached IDR5.10 trillion and IDR5.69 trillion, respectively. Following this sukuk auction, year-to-date, the Government has successfully issued IDR533.37 trillion of securities.
PEFINDO rating agency has affirmed the rating of idAAA for Shelf Registration II Pegadaian Phase I 2013 series D. The IDR601.0 billion bond will mature on July 9, 2020. Pegadaian’s readiness to repay its maturing bond is supported by its cash and placement of IDR625.1 billion as of the end of December 2019, monthly internal cash flow generation of IDR11.3 trillion, and unused portion of bank lines of around IDR4.6 trillion at the end of February 2020. According to PEFINDO, the corporate rating reflects Pegadaian’s status as an important Government-related entity, the company’s superior position in the pawn service business, very strong capitalization, and a favorable liquidity and financial flexibility position. However, on the flip side, the rating is still constrained by increasing pressure on its asset quality. PT Pegadaian (Persero) provides pawning and micro-lending services, and it is fully owned by the Indonesian Government.