BNIS Fixed Income Daily Report of January 13, 2021.
Bond Market Review (Tue, 12/1)
Indonesia’s local currency bond prices extended its downside movement yesterday amid increasing external pressure. Most government bond yields climbed 1 – 4 bps along the curve, in which, the 10-year Government bond yield rose 3 bps to 6.20%. In line with the IDR-denominated bonds, the USD-denominated bond prices weakened yesterday, in which INDON-26, INDON-30, and INDON-50 yields climbed to 1.34% (+1 bps), 2.16% (+7 bps), and 3.28% (+3 bps), respectively. The IDR weakened slightly to IDR14,130/USD yesterday, compared to Monday’s closing level of IDR14,125/USD.
The outright trading volume of Government securities was recorded at IDR22.0 trillion yesterday, increasing from Monday’s trading volume of IDR15.9 trillion, and also higher than the month-to-date average daily trading volume of IDR19.8 trillion. FR0082 and FR0086 were the two most actively-traded series in the secondary market, with the trading volume of IDR2.9 trillion and IDR2.7 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR2.6 trillion yesterday.
Bond Market Preview (Wed, 13/1)
Pressure in Indonesia’s bond market is expected to ease amid increasing global optimism. Global investors’ optimism on the US economic prospect increased along with the higher expectation on the potential additional fiscal stimulus from the US Government. President-elect Joe Biden is expected to release a stimulus plan this week. His plan is expected to include aid for state and local governments and expanded enhanced unemployment benefits. The positive expectation spurred investors to enter the riskier assets, which can be spotted from the strengthening US stock market last night (Dow Jones +0.19%; S&P 500 +0.04%; Nasdaq +0.28%), after weakening on the previous day. Meanwhile, the US Government bond yields declined slightly along with the robust demand for the Treasury Department’s USD38 billion sale of benchmark 10-year notes. The 10-year and 30-year US Treasury yields were closed at 1.13% (-2 bps) and 1.88% (-1 bps), respectively, last night. Increasing global optimism may also add a positive catalyst which may curb the likelihood of further increase on Indonesia’s local currency bond yields. The upside trend of IDR-denominated bond yields in recent days also can be seen as an opportunity to “buy on weakness” for investors. Meanwhile, the potential of further increase in USD-denominated bond yields may also be more limited as the US Treasury yields started to decline last night.
Given the easing market pressure, then, the belly and long-end series of Government bonds such as FR0086, FR0059, FR0064, FR0071, FR0087, FR0054, FR0074, FR0068, and FR0075 may become an attractive choice for investors.
Indonesia Bond Market News
Indonesia Government issued IDR11.3 trillion of Sukuk through yesterday’s sukuk auction, lower than its indicative target of IDR14.0 trillion. Total investors’ bids on yesterday’s sukuk auction reached IDR24.3 trillion, slightly lower than average bids on the five latest sukuk auctions in 2020 of IDR24.4 trillion. The strongest demand came at the PBS028 series, in which investors’ bids reached IDR7.1 trillion for this sukuk. Following this sukuk auction, year-to-date, the Government has successfully issued IDR121.9 trillion of securities. As a continuation of yesterday’s Sukuk auction, the Government will also conduct an additional sukuk auction (Greenshoe Option) today.
PT Sarana Multigriya Finansial (SMF) (Persero) will issue Shelf Registration Bond V Phase V 2021 totaling up to IDR1.9 trillion, and Shelf Registration Sukuk Mudharabah I Phase III 2020 totaling up to IDR1.0 trillion. The bonds will be issued in two series i.e., the 370-day series A with an indicative coupon of 4.75% – 5.75%, and the 3-year series B with an indicative coupon of 5.75% – 6.75%. The sukuk will be issued with a tenor of 370-days with an indicative coupon of 4.75% – 5.75%. This issuance is a part of Shelf Registration Bond V and Shelf Registration Sukuk Mudharabah I with a total issuance target of IDR19.0 trillion and IDR2.0 trillion, respectively. PEFINDO rating agency has assigned the rating of idAAA for this bond. The bookbuilding period will be held until January 19, 2021. The Public offering period will be held on February 4 and 5, 2021, while the electronic distribution will be conducted on February 9, 2021.