BNIS Fixed Income Daily Report of May 20, 2020.
Bond Market Review (Tue, 19/5)
Another upside movement took place on Indonesia’s bond market yesterday along with higher global optimism. The Government bond yields declined by 4 – 11 bps along the curve, in which the 10-year Government bond yield tumbled 9 bps to 7.61%. The IDR strengthened to IDR14,770/USD yesterday, compared to Monday’s closing level of IDR14,850/USD.
The outright trading volume of Government securities was recorded at IDR14.3 trillion yesterday, declining from Monday’s trading volume of IDR23.2 trillion, and lower than the year-to-date average daily trading volume of IDR19.1 trillion. FR0081 and FR0084 were the two most actively-traded series in the secondary market, with the trading volume of IDR1.5 trillion and IDR1.3 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR630.0 billion yesterday.
Bond Market Preview (Wed, 20/5)
Indonesia’s bond market volatility is expected to increase along with the higher external pressure. The global market pressure increased as investors doubts on the Moderna Inc.’s vaccine study, which didn’t produce enough critical data to assess its success. Additionally, the global pressure also increased following investors’ concern on the global economic prospects due to the impact of the coronavirus pandemic. The IMF Managing Director, Kristalina Georgieva, said that the economic recovery will take much longer than initially expected. The IMF will also likely revise down its forecast for a 3% contraction in GDP in 2020, with only a partial recovery expected in 2021, instead of the 5.8% rebound which was previously expected. Moreover, the US housing starts data in April 2020 which was released last night came at 891,000, declined by 30.17% from the previous month, and it was the worst monthly decline on record. Those sentiments spurred the global market participants to move into safe-haven assets, reducing demand on the riskier assets, dragging the US stock market down last night (Dow Jones -1.59%; S&P 500 -1.05%; Nasdaq -0.54%), which was also followed by declining the 10-year and 30-year US Treasury yields to 0.69% (-4 bp) and 1.41% (-3 bps), respectively. Increasing external pressure is also expected to curb the potential of further declines on Indonesia’s bond yields on the final trading day this week.
Given the higher global market pressure, then, the short-end and the belly series of Government bonds such as FR0053, FR0061, FR0070, FR0077, FR0042, FR0047, FR0064, and FR0071 may remain attractive for investors.
Indonesia Bond Market News
PEFINDO rating agency has affirmed its idAAA ratings to PT Bank BTPN Tbk (BTPN) and the MTN II/2017 issued by PT Bank Sumitomo Mitsui Indonesia (SMBC Indonesia), which was merged with BTPN effective February 2019. The outlook for the corporate credit rating is stable. According to PEFINDO, the rating reflects very strong support from BTPN’s Parent, Sumitomo Mitsui Banking Corporation (SMBC), favorable capitalization profile, strong market position, and strong asset quality indicators. However, the rating is still partly offset by pressure on profitability. PEFINDO stated that the rating could be lowered if the rating agency views a material decline in SMBC’s support and ownership of BTPN. The rating could also be under pressure if there is a material decline in its business profile or asset quality and profitability. PEFINDO expect the impact of COVID-19 on BTPN’s overall credit profile will remain manageable, supported by its very strong support from Parent, very strong capitalization and liquidity profiles, and strong market position in the banking industry particularly in the corporate, pensioner, and small and medium-sized enterprise (SME) segments. Although the Bank has substantial exposure to sectors affected by COVID-19 such as household (excluding pensioner loan), manufacturing, finance companies, trading, and transportation, representing around 59% of the Bank’s total loan portfolio as of December 31, 2019 (FY2019), these concerns are partially offset by the Bank’s conservative underwriting approach and strong loan monitoring policy.
PT Hartadinata Abadi Tbk offers a coupon of 10.50% for the issuance of Shelf Registration Bond I Phase II 2020 totaling to IDR400.0 billion. The bond will be issued in the form of a 3-year paper. This bond issuance is a part of Shelf Registration Bond I with a total issuance target of IDR1.0 trillion. PEFINDO rating agency has assigned the rating of idA- for the company’s bonds. The public offering period will be held June 2, 2020, while the electronic distribution and IDX listing will be conducted on June 5 and 8, 2020, respectively.