BNIS Fixed Income Daily Report of July 28, 2020.
Bond Market Review (Mon, 27/7)
Indonesia’s bond prices advanced slightly early this week. Most government bond yields fell by about 1 – 3 bps, in which, the 10-year Government bond yield inched lower 1 bps to 6.84%. The IDR strengthened to IDR14,535/USD yesterday, compared to Friday’s closing level of IDR14,610/USD.
The outright trading volume of Government securities was recorded at IDR23.2 trillion yesterday, increasing from Friday’s trading volume of IDR14.9 trillion, and higher than the year-to-date average daily trading volume of IDR17.4 trillion. FR0082 and FR0081 were the two most actively-traded series in the secondary market, with the trading volume of IDR12.6 trillion and IDR2.8 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR2.5 trillion yesterday.
Bond Market Preview (Tue, 28/7)
Indonesia’s bond market is expected to strengthen in the near term amid easing external pressure. Global investors’ optimism increased as most of the US companies 2Q20’s earnings results were not as bad as previously expected. Through early this week, as much as 130 S&P 500 companies had reported earnings, with 80% beating market analyst expectations. Global investors also turned their eyes to the US as the lawmakers tried to push forward on its another stimulus package. The US Treasury Secretary said that Republicans had finalized the bills for another USD1.0 trillion economic stimulus package. The market sentiment also improved after the US government allocated an additional USD472 million towards Moderna’s coronavirus vaccine research. Those sentiments were responded positively by global market participants, spurring investors to enter the riskier assets, reducing demand on the safe-haven assets, which can be spotted from the strengthening US stock market last night (Dow Jones +0.43%; S&P 500 +0.74%; Nasdaq +1.67%), which was also followed by increasing the 10-year and 30-year US Government bond yields to 0.62% (+3 bps) and 1.26% (+3 bps), respectively. Increasing global optimism is also expected to bring a positive impact to the domestic bond market, opening a room for declining Indonesia’s bond yields in the near term. The likelihood of declining domestic bond yields will be also supported by robust investors’ liquidity.
Given the potential of market strengthening in the near term, then, the belly and long-end series of Government bonds such as FR0081, FR0082, FR0073, FR0054, FR0058, FR0074, FR0065, FR0068, FR0080, and FR0083 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., SPN03201029, SPN12210429, FR0081, FR0082, FR0080, FR0083, and FR0076. Investors’ demand is expected to be strong along with the robust investors’ liquidity as well as easing global market pressure. Investors’ liquidity will be also supported by additional cash from the VR0031 series which matured yesterday amounted to IDR25.3 trillion. The Government is still expected to be able to issue bonds in line with its indicative target today. Taking into account the market condition in recent days, we forecast the indicative yields for today’s auction are as follow :
SPN03201029 : 3.45% – 3.65%
SPN12210429 : 3.65% – 3.85%
FR0081 : 5.98% – 6.08%
FR0082 : 6.81% – 6.91%
FR0080 : 7.28% – 7.38%
FR0083 : 7.40% – 7.50%
FR0076 : 7.48% – 7.58%
PT Merdeka Copper Gold Tbk offers a coupon up to 10.50% for the issuance of Shelf Registration Bond I Phase I 2020 totaling to IDR1.40 trillion. This bond will be issued in two series i.e., the 367-day series A with a coupon of 8.90% will be issued as much as IDR673.65 billion, and the 3-year series B with a coupon of 10.50% will be issued as much as IDR726.35 billion. This issuance is a part of Shelf Registration Bond I with a total issuance target of IDR1.7 trillion. PEFINDO rating agency has assigned the rating of idA for the company’s bonds. The proceeds from this bond issuance will be used by the company to repay its part of debt principle. The public offering period will be held until July 28, 2020, while the electronic distribution and IDX listing will be conducted on July 30 and August 3, 2020, respectively.