BNIS Fixed Income Daily Report of July 30, 2020.
Bond Market Review (Wed, 29/7)
Indonesia’s bond prices moved sideways yesterday along with a mixed catalyst from both external and domestic. The government bond yield movements were mixed ranging between 1 – 2 bps along the curve, in which, the 10-year Government bond yield was relatively unchanged from the previous day’s closing level of 6.81%. The IDR weakened slightly to IDR14,543/USD yesterday, compared to Tuesday’s closing level of IDR14,535/USD.
The outright trading volume of Government securities was recorded at IDR17.8 trillion yesterday, slightly lower than Tuesday’s trading volume of IDR18.0 trillion, yet, remained 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 IDR6.3 trillion and IDR2.5 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR750.7 billion yesterday.
Bond Market Preview (Thu, 30/7)
Another sideways movement is expected to take place in Indonesia’s bond market on the final trading day this week. The global investors’ optimism increased after the US Central Bank kept its benchmark interest rate unchanged at 0.0% – 0.25% in its FOMC meeting last night. The Federal Reserve also reiterated commitment to maintain its bond purchases and a host of lending and liquidity programs as an effort to spur the economy amid the coronavirus pandemic. The Fed also stated that the US economic activity and employment have increased slightly in recent months but remain well below the level in early this year. Moreover, the US Central Bank also stated that the weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall, financial conditions have improved in recent months, following policy measures to support the economy and the flow of credit to US households and businesses. Those sentiments triggered the strengthening US stock market last night, in which the Dow Jones, S&P 500 and Nasdaq climbed 0.61%, 1.24%, and 1.35%, respectively. Meanwhile, the 2-year and 10-year US Treasury yields declined slightly to 0.13% (-1 bps) and 0.57% (-1 bps). The low regime of global interest rate may also keep Indonesia’s bond yields at the low level. However, the likelihood of further yield declines on Indonesia’s bond market in the near term may be limited as the global volatility persists amid increasing global coronavirus cases.
Given the potential sideways market movement in the near term, then, short-term trading strategy on Government bonds such as FR0070, FR0077, FR0081, FR0071, FR0082, FR0073, FR0054, FR0058, FR0074, FR0080, and FR0083 may remain attractive for investors.
Indonesia Bond Market News
Indonesia Government plans to conduct a sukuk auction on Tuesday, August 4, 2020, with the indicative target of IDR8.0 trillion. On the next week’s auction, the Government will offer six series of Sukuk i.e., SPNS05022021, PBS027, PBS026, PBS025, and PBS028. Investors’ demand is expected to be moderat along with the robust investors’ liquidity despite higher global market volatility. The Government is still expected to be able to issue sukuk in line with its indicative target on next week’s auction. Year-to-date, the Government has successfully issued IDR121.72 trillion of sukuk through the sukuk auctions.
PT Indomobil Finance offers a coupon up to 9.90% for the issuance of Shelf Registration Bond IV Phase I 2020 totaling to IDR750.0 billion. This bond will be issued in three series i.e., the 370-day series A with a coupon of 8.45% will be issued as much as IDR179.0 billion, the 2-year series B with a coupon of 9.55% will be issued as much as IDR17.0 billion, and the 5-year series C with a coupon of 9.90% will be sold worth of IDR90.0 billion. The remaining IDR464.0 billion will be sold with the best effort scheme. This issuance is part of Shelf Registration Bond IV with a total issuance target of IDR4.0 trillion. PEFINDO rating agency has assigned the rating of idA for the company’s bonds. The electronic distribution and IDX listing will be conducted on August 4 and 5, 2020, respectively.