BNIS Fixed Income Daily Report of April 7, 2021.
Bond Market Review (Tue, 4/6)
Indonesia’s local currency bond prices continued its gains yesterday amid increasing global optimism. The government bond yields declined by about 2 – 7 bps along the curve, in which the 10-year Government bond yield tumbled 7 bps to 6.55%. Meanwhile, the USD-denominated bond yields moved sideways, in which INDON-31 and INDON-51 yields were relatively unchanged from the previous day’s closing level of 2.25% and 3.07%, respectively. The IDR strengthened slightly to IDR14,505/USD yesterday, compared to Monday’s closing level of IDR14,525/USD.
The outright trading volume of Government securities was recorded at IDR12.5 trillion yesterday, increasing from Monday’s trading volume of IDR8.7 trillion, yet, remained lower than the year-to-date average daily trading volume of IDR21.9 trillion. FR0087 and PBS027 were the two most actively-traded series in the secondary market, with the trading volume of IDR2.5 trillion and IDR1.5 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR1.3 trillion yesterday.
Bond Market Preview (Wed, 4/7)
The likelihood of further yield declines may be curbed by the potential of investors’ profit taking following recent gains. Global investors’ optimism on the economic recovery continued after the US JOLTs Jobs Opening data came at 7.37 million, higher than the previous month’s figure of 7.10 million. Meanwhile, the International Monetary Fund upgraded its global economic growth forecast to 6% in 2021, from the previous estimate in January of 5.5%. The US stock market declined last night (Dow Jones -0.29%; S&P 500 -0.10%; Nasdaq -0.05%) after strengthening to record highs on the previous day. Meanwhile, the US Government bond yields extended its downside movement, in which the 10-year and 30-year yields fell to 1.66% (-4 bps) and 2.33% (-2 bps), respectively. Continuing investors’ optimism on the global economic recovery as well as lower US Treasury yields may open a room for declining Indonesia’s bond yields in the near term. However, on the flip side, the possibility of significant yield declines in the domestic bond market may be limited by investors’ profit taking following gains in recent days. The likelihood of declining yield can also be limited by the less aggressive stance from investors, which can be spotted from yesterday’s sukuk auction, in which total investors’ bids only reached IDR14.56 trillion, lower than previous sukuk auction of IDR17.16 trillion.
Given a more limited potential of declining yields in the near term, then, a short-term trading strategy may be more attractive to be adopted by market participants. The government bonds such as FR0070, FR0086, FR0064, FR0071, FR0078, FR0087, FR0074, FR0068, FR0079, and FR0083 will be attractive for trading purposes.
Indonesia Bond Market News
Indonesia Government issued IDR7.345 trillion of Sukuk through yesterday’s sukuk auction, lower than its indicative target of IDR10.0 trillion. Total investors’ bids on yesterday’s sukuk auction reached IDR14.56 trillion, lower than the previous sukuk auction of IDR17.16 trillion, and also lower than average investor bids on the six previous sukuk auctions since early this year of IDR22.18 trillion. The stronger demand came at the PBS027 and PBS029 series, in which investors’ bids reached IDR3.26 trillion and IDR3.05 trillion for these series. Following this sukuk auction, year-to-date, the Government has successfully issued IDR403.74 trillion of securities. As a continuation of yesterday’s Sukuk auction, the Government will also conduct an additional sukuk auction (Greenshoe Option) today.
PEFINDO rating agency has affirmed the rating of idAA for PT Bank Pan Indonesia Tbk (Panin Bank) and its outstanding Shelf Registration Bonds II and Shelf Registration Bonds III. PEFINDO has also affirmed the rating of idA+ for the Bank’s outstanding Shelf Registration Subordinated Bonds II and Shelf Registration Subordinated Bonds III. The Bank’s readiness to pay the maturing Shelf Registration Bond II Phase I Year 2016 amounting to IDR2.0 trillion that will mature on June 28, 2021 is supported by its placement in central bank amounting to IDR3.1 trillion as of February 28, 2021. The outlook for the corporate rating is stable. According to PEFINDO, the rating reflects Panin Bank’s very strong capitalization, strong market position, and the strong likelihood of support from ANZ Banking Group as one of the Bank’s controlling shareholders. However, these strengths are partly offset by its moderate asset quality.