BNIS Fixed Income Daily Report of October 16, 2020.
Bond Market Review (Thu, 15/10)
Indonesia’s bond market extended its upside movement yesterday. Most government bond yields declined by about 2 – 9 bps along the curve, where the 10-year Government bond yield tumbled 9 bps to 6.73%. The IDR strengthened to IDR14,690/USD yesterday, compared to Wednesday’s closing level of IDR14,718/USD.
The market strengthening was also followed by increasing investors’ activity in secondary market, in which the outright trading volume of Government securities reached IDR18.4 trillion yesterday, increasing from Wednesday’s trading volume of IDR15.5 trillion, and also higher than the month-to-date and year-to-date average daily trading volume of IDR13.9 trillion and IDR17.1 trillion, respectively. FR0082 and FR0087 were the two most actively-traded series in the secondary market, with the trading volume of IDR3.7 trillion and IDR2.3 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR882.8 billion yesterday.
Bond Market Preview (Fri, 16/10)
The likelihood of further decline on Indonesia’s bond yield is expected to be limited on the final trading day this week amid increasing global volatility. Global market volatility increased along with increasing uncertainty on the prospect of the US fiscal stimulus as well as raising coronavirus cases across Europe. The higher coronavirus cases in Europe also increased investors’ concern on the pandemic restrictions to curb a second wave of the virus. France has declared a public health state of emergency, while the UK is nearing a second national lockdown. External pressure also increased as the US initial jobless claims came in at 898k last week, weaker than the previous week’s level of 845k. Last week’s figure was also higher than the consensus expectation of 825k. Those sentiments also triggered the weakening of the US stock market last night (Dow Jones -0.07%; S&P 500 -0.15%; Nasdaq -0.47%). Meanwhile the 10-year and 30-year US Treasury yields were relatively unchanged at 0.73% and 1.51%, respectively. Increasing external pressure is also expected to curb the possibility of declining Indonesia’s bond yields in the near term. The likelihood of further yield declines is also more limited on the final trading day this week as investors are expected to be less aggressive in the market ahead of next Tuesday’s Government bond auction.
Given the potential sideways market movement, then, short-term trading strategy on the Government bonds such as FR0081, FR0059, FR0064, FR0082, FR0054, FR0058, and FR0074 series may remain attractive for investors.
Indonesia Bond Market News
Indonesia Government plans to conduct a Government bond auction on Tuesday, October 20, 2020, with the indicative target of IDR20.0 trillion. On next week’s auction, the Government will offer seven series of bonds i.e., SPN03210121, SPN12210701, FR0086, FR0087, FR0080, FR0083, dan FR0076. Investors’ appetite is expected to be moderate amid robust investors’ liquidity, despite higher global market volatility. The Government is still expected to be able to issue bonds in line with its indicative target. Year-to-date, the Government has successfully issued IDR424.6 trillion of bonds through 20 times bond auctions and once Greenshoe Option.
PT Bank QNB Indonesia Tbk offers a coupon of 6.25% for the issuance of Shelf Registration Bond I Phase III 2020 totaling to IDR448.0 billion. The 367-day paper will mature on November 10, 2021. This issuance is a part of Shelf Registration Bond I with a total issuance target of IDR1.0 trillion. Fitch Ratings Indonesia rating agency has assigned the rating of AAA(idn) for the company’s bonds. The public offering period will be held on October 22 – 26, 2020, while the electronic distribution and IDX listing will be conducted on November 3 and 4, 2020, respectively.