BNIS Fixed Income Daily Report of June 30, 2020.
Bond Market Review (Mon, 29/6)
Indonesia’s bond prices declined early this week along with increasing external pressure. Most of the Government bond yields increased by about 1 – 5 bps along the curve, in which the 10-year yield climbed 4 bps to 7.20%. The IDR weakened slightly to IDR14,245/USD yesterday, compared to Friday’s closing level of IDR14,220/USD.
The outright trading volume of Government securities was recorded at IDR21.0 trillion yesterday, increasing from Friday’s trading volume of IDR12.7 trillion, and also higher than the year-to-date average daily trading volume of IDR17.9 trillion. FR0081 and FR0070 were the two most actively-traded series in the secondary market, with the trading volume of IDR2.9 trillion and IDR2.8 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR1.2 trillion yesterday.
Bond Market Preview (Tue, 30/6)
Volatility in Indonesia’s bond market is expected to persist following the global market volatility. After weakening in early this week, Indonesia’s bond prices are expected to strengthen today along with the higher global investors’ optimism on the prospect of US economic recovery. The US Pending Home Sales in May spiked 44.3% compared with April, higher than consensus expectation of a 15% rise. The optimism on the economic prospect temporarily erased the negative sentiment from the increasing global coronavirus cases. The investors’ optimism also can be spotted from the strengthening US stock market last night (Dow Jones +2.32%; S&P 500 +1.47%; Nasdaq +1.20%). The higher global optimism is also expected to open a room for Indonesia’s bond market strengthening in the near term. The market participants are also expected to focus on today’s Government bond auction. If today’s auction succeeds with robust investors’ demand and the Government manages to issue bonds in line with its indicative target, then it may also add the positive catalyst for the domestic bond market. However, on the flip side, the likelihood of significant decline on Indonesia’s bond yields may be more limited as the global market volatility persists due to the upside trend of the coronavirus cases globally.
Given the potential of market strengthening in the near term, albeit the volatility persists, then, the short-term trading strategy on Government bonds such as FR0070, FR0081, FR0082, FR0073, FR0054, FR0058, FR0074, FR0068, FR0080, and FR0083 series may be more attractive for investors.
Indonesia Bond Market News
Indonesia Government will conduct a bond auction with the indicative target of IDR20.0 trillion today. The Government will offer seven series of bonds i.e., SPN03201001, SPN12210701, FR0081, FR0082, FR0080, FR0083, and FR0076. Investors’ demand is expected to be strong along with the robust investors’ liquidity despite the higher global market pressure. The Government is still expected to be able to issue bonds in line with its indicative target. Taking into account the market condition in recent days, we forecast the indicative yields for today’s auction are as follow :
SPN03201001 : 3.40% – 3.60%
SPN12210701 : 3.65% – 3.85%
FR0081 : 6.47% – 6.60%
FR0082 : 7.12% – 7.25%
FR0080 : 7.54% – 7.67%
FR0083 : 7.58% – 7.71%
FR0076 : 7.68% – 7.81%
PT Merdeka Copper Gold Tbk. will issue Shelf Registration Bond I Phase I 2020 totaling to IDR1.4 trillion. The bonds will be issued in two series, i.e., the 1-year series A with the indicative coupon of 8,75% – 9.50%, and the 3-year series B with the indicative coupon of 10.00% – 10.75%. This bond issuance is part of Shelf Registration bond I with the total issuance target of IDR1.7 trillion. PEFINDO rating agency has assigned the idA rating for the bonds. The company will use all of the proceeds from this bond issuance to repay its debt. The bookbuilding period will be held until July 10, 2020. The public offering period will be held on July 24 and 27, 2020, while the electronic distribution and IDX listing will be conducted on July 30 and August 3, 2020, respectively.