BNIS Fixed Income Daily Report of July 29, 2020.
Bond Market Review (Tue, 28/7)
Indonesia’s bond market extended its gains yesterday amid easing external pressure. Most government bond yields fell by about 1 – 5 bps, in which, the 10-year Government bond yield declined 3 bps to 6.81%. The IDR was relatively unchanged from the previous day’s closing level of IDR14,535/USD.
The outright trading volume of Government securities was recorded at IDR18.0 trillion yesterday, declining from Monday’s trading volume of IDR23.2 trillion, yet, remained higher than the year-to-date average daily trading volume of IDR17.5 trillion. FR0082 and FR0081 were the two most actively-traded series in the secondary market, with the trading volume of IDR4.2 trillion and IDR4.1 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR723.3 billion yesterday.
Bond Market Preview (Wed, 29/7)
Indonesia’s bond yields are expected to move sideways in the near term along with a mixed catalyst from both external and domestic. The global market pressure increased amid uncertainty on the US economic stimulus package. A fight looms over supplemental unemployment benefits, with Democrats eager to maintain the existing USD600 weekly supplement, while the Republican plan to reduce it to a USD200 add-on through September. Meanwhile, the US consumer confidence index fell to 92.6 in July, from a 98.3 in June. Continuing coronavirus cases, in which total global cases have reached more than 16.5 million, also added pressure in the global market. The market participants also adopted a wait and see mode on the FOMC meeting this midweek to see further steps from the US central bank to support the economy. As the market pressure lifted, investors moved into the safe-haven assets, reducing demand on the riskier assets, which can be seen from the weakening US stock market last night (Dow Jones -0.77%; S&P 500 -0.65%; Nasdaq -1.27%), which was also followed by declining the 10-year and 30-year US Treasury yields to 0.58% (-4 bps) and 1.22% (-4 bps), respectively. Increasing external pressure is also expected to curb the possibility of further decline on Indonesia’s bond yields. However, the likelihood of significant increase in domestic bond yields may be also limited by robust investors’ liquidity, which can be spotted from solid investors’ participation in the bond auction. Total incoming bids on yesterday’s auction reached IDR72.8 trillion, higher than the previous bond auction of IDR61.2 trillion.
Given the potential sideways market movement in the near term, then, the short-term trading strategy on several Government bonds such as FR0070, FR0081, FR0082, FR0054, FR0058, FR0080, and FR0083 may remain attractive for investors.
Indonesia Bond Market News
Indonesia Government has successfully issued IDR22.0 trillion of bonds through yesterday’s bond auction. Total investors’ bid on yesterday’s auction reached IDR72.78 trillion, higher than the previous bond auction of IDR61.16 trillion, indicating that investors appetite for Indonesia’s bond market was improving amid improving global sentiments as well as robust investors’ liquidity. Given the solid investors’ participation, the Government managed to issue bonds higher than its indicative target of IDR20.0 trillion. Following yesterday’s bond auction, year-to-date, the Government has successfully issued IDR749.54 trillion of Government securities.
PT Bussan Auto Finance will issue Shelf Registration Bond I Phase I 2020 totaling to IDR100.0 billion and Shelf Registration Sukuk Mudharabah I Phase I 2020 amounting to IDR15.0 billion. The bond and sukuk will be issued in the form of 3-year papers with a coupon of 8.25%. These bond and sukuk issuances are part of Shelf Registration Bond I and Shelf Registration Sukuk Mudharabah I issuances with a total issuance target of IDR3.5 trillion and IDR500.0 billion, respectively. The public offering period will be held until July 29, 2020, while the electronic distribution and IDX listing will be conducted on August 4 and 5, 2020, respectively.