BNIS Fixed Income Daily Report of February 23, 2021.
Bond Market Review (Mon, 2/22)
Indonesia’s local currency bond prices declined early this week. The Government bond yields jumped 4 – 15 bps along the curve. In which, the 10-year Government bond yield surged 10 bps to 6.63%. In line with IDR-denominated bonds, the USD-denominated bond yields also climbed yesterday, in which INDON-26, INDON-31, and INDON-51 yields were closed at 1.37% (+5 bps), 2.28% (+11 bps), and 3.15% (+6 bps), respectively. The IDR weakened to IDR14,118/USD yesterday, compared to Friday’s closing level of IDR14,065/USD.
The outright trading volume of Government securities was recorded at IDR33.8 trillion yesterday, increasing from Friday’s trading volume of IDR27.6 trillion, and also higher than the month-to-date and year-to-date average daily trading volume of IDR25.6 trillion and IDR23.3 trillion, respectively. FR0087 and FR0086 were the two most actively-traded series in the secondary market, with the trading volume of IDR6.9 trillion and IDR4.6 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR3.7 trillion yesterday.
Bond Market Preview (Tue, 2/23)
The likelihood of declining Indonesia’s bond yield is expected to be limited in the near term as global market pressure persists. Global market participants remain focused on the increasing US Treasury in recent weeks amid the higher expectation on the US economic recovery as well as the prospect of fast-rising inflation. The 10-year US Treasury yield surged 30 bps month-to-date and recorded at 1.36% last night. Meanwhile, the US stocks were mixed last night, in which the Dow Jones, S&P 500, and Nasdaq were closed at +0.09%, -0.77%, and -2.46%, respectively. The upside trend of US Treasury yield is expected to curb the possibility of declining yields in Indonesia’s bond market, both IDR and USD denominated bonds. However, on the flip side, the likelihood of significant increase of domestic bond yields may also be more limited amid the low benchmark interest rate milieu. Foreign investors’ appetite to Indonesia’s bond market was still strong, which can be spotted from declining 5-year Indonesia’s CDS to 68.9 currently, from end of January’s level of 77.5. Foreign investors also posted a net buy in Government securities of IDR6.48 trillion since early this month. The strong foreign appetite may also add a positive sentiment to the market. Furthermore, the Bank Indonesia’s action to maintain the market stability may also limit the possibility of significant increase in Indonesia’s bond yields.
As the global market pressure persist, then, the short-end and the belly series of Government bonds such as FR0070, FR0077, FR0081, FR0086, FR0064, FR0071, FR0078, FR0082, and FR0087 may be more attractive for investors.
Indonesia Bond Market News
Indonesia Government will conduct a Sukuk auction today with the indicative target of IDR12.0 trillion. On today’s auction, the Government will offer six series of Sukuk i.e., SPNS10082021 (6-month), PBS027 (2.3-year), PBS017 (4.7-year), PBS029 (13.1-year), PBS004 (16.0-year), and PBS028 (25.7-year). Investors’ demand is expected to be moderate as global volatility persists, despite robust investors’ liquidity early this year. The Government is expected to be able to issue sukuk in line with its indicative target today. Taking into account the market condition in recent days, we forecast the indicative yields on today’s auction are as follow:
SPNS10082021 : 3,10% – 3,25%
PBS027 : 4,65% – 4,80%
PBS017 : 5,60% – 5,75%
PBS029 : 6,55% – 6,70%
PBS004 : 6,60% – 6,75%
PBS028 : 7,00% – 7,15%
PEFINDO rating agency has affirmed its idBBB ratings for PT Batavia Prosperindo Finance Tbk (BPFI) and the Company’s Shelf Registration Bond II/2018 and Shelf Registration Bond II Phase II/2020. The outlook for the corporate rating is stable. The Company’s readiness to pay its maturing Shelf Registration Bond II Phase II/2020 of IDR200.0 billion due on May 14, 2021, is supported by its monthly receivables collection of around IDR80 billion and unused credit facility of IDR285.5 billion at the end of December 2020. According to PEFINDO, the rating reflects BPFI’s established presence in the used car financing segment and strong capitalization. The rating is constrained by its low operating efficiency, moderate asset quality, and tight competition in the industry. The rating may be raised if BPFI significantly improves its market position, asset quality, and profitability indicators on a consistent basis. Conversely, the rating could be lowered if its asset quality and profitability deteriorate significantly. The rating may also be under pressure if its liquidity profile weakens considerably.