BNIS Fixed Income Daily Report of June 29, 2020.
Bond Market Review (Fri, 26/6)
Indonesia’s bond prices advanced slightly on last week’s final trading day along with increasing global investors’ optimism. The market strengthening was led by the short-end and the belly series, in which the yields on those maturities fell by about 2 – 5 bps. Still, the long-end series were relatively unchanged compared to the previous day’s closing, in which the 10-year yield remained closed at 7.16%. The IDR extended its losses to IDR14,220/USD on Friday, from the previous day’s closing level of IDR14,175/USD.
The outright trading volume of Government securities was recorded at IDR12.7 trillion on Friday, slightly higher than the previous day’s trading volume of IDR12.6 trillion, yet, remained lower than the year-to-date average daily trading volume of IDR17.9 trillion. FR0081 and PBS014 were the two most actively-traded series in the secondary market, with the trading volume of IDR3.1 trillion and IDR1.7 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR1.3 trillion on Friday.
Bond Market Preview (Mon, 29/6)
The likelihood of market correction on Indonesian bonds is relatively open along with increasing external pressure. The global investors’ worries on the coronavirus spread and its impact to the economy increased following the higher number of coronavirus cases globally. According to John Hopkins University data, the coronavirus cases have reached more than 10 million globally, in which more than 2.5 million cases have been recorded in the US. Some states in the US, such as California, Texas and Florida seeing record numbers of new cases, thus, the states curbed some of its reopening measures. The resurgence of coronavirus cases in the US has also cast doubts on expectations about a V-shaped recovery for the US. Increasing global pressure also spurred investors to enter the safe-haven assets, and staying away from the riskier assets, which can be spotted from the weakening US stock market on Friday (Dow Jones -2.84%; S&P 500 -2.42%; Nasdaq -2.59%), which was also followed by declining the 10-year and 30-year US Treasury yields by 5 bps and 7 bps to 0.64% and 1.37%, respectively. The higher external pressure is also expected to open a possibility of Indonesia’s bond market correction early this week after strengthening on the final trading day last week. Investors are also expected to be less aggressive early this week, ahead of tomorrow’s Government bond auction. However, the likelihood of significant market correction may be limited by the Bank Indonesia’s action to maintain market stability.
Given the higher external pressure, then, the short-end and belly series of Government bonds such as FR0053, FR0043, FR0063, FR0070, FR0077, FR0044, FR0064, and FR0071 may be more attractive to become investors’ choice.
Indonesia Bond Market News
PT Bussan Auto Finance will issue Shelf Registration Bond I Phase I 2020 amounting to IDR100.0 billion and Shelf Registration Sukuk Mudharabah I Phase I 2020 totaling to IDR100.0 billion. These issuances are part of Shelf Registration Bond I and Shelf Registration Sukuk Mudharabah I with a total issuance target of IDR3.5 trillion and IDR500.0 billion, respectively. The Company’s bond and sukuk phase I will be issued in the form of 5-year papers with the indicative coupon of 7.75% – 8.75%. Fitch rating agency has assigned the AAA(idn) rating for the bond and Sukuk. The bookbuilding period will be held until July 6, 2020, while the electronic distribution will be conducted on July 24, 2020.
PEFINDO rating agency has affirmed the corporate rating of idAA for PT ASDP Indonesia Ferry (Persero) (ASDP). The outlook for the corporate rating is stable. According to PEFINDO, the rating reflects ASDP’s strong support from the government, established market presence in the foot passenger and vehicle ferry markets, and stable profitability. However, the rating is still constrained by competition from other modes of transportation and a more aggressive credit profile from its current strong profile due to expansion and transformation initiatives amid slower cash-flow generation during the pandemic. PEFINDO also stated that the rating will be upgraded if ASDP’s expansion and transformation initiatives translate into stronger revenue generation and improved profitability on a sustained basis, while maintaining a prudent financial policy. On the flip side, PEFINDO could lower the rating if there are significant capital cost overruns leading to unexpected increases in debt burden, and a material weakening in its cash flow protection measures. PEFINDO could also lower the rating if there is a significant deterioration in government support, such as through a material divestment of ownership and/or a decrease in its public service role.