BNIS Fixed Income Daily Report of April 13, 2021.
Bond Market Review (Mon, 4/12)
Indonesia’s local currency bond prices declined early this week. Most government bond yields increased by about 1 – 11 bps along the curve, in which, the 10-year Government bond yield climbed 7 bps to 6.51%. In contrast with IDR-denominated bonds, the USD-denominated bond yields extended its downside movement yesterday, in which INDON-26, INDON-31 and INDON-51 yields were closed at 1.69% (-5 bps), 2.15% (-1 bps), and 2.99% (-2 bps), respectively. The IDR weakened to IDR14,595/USD yesterday, compared to Friday’s closing level of IDR14,565/USD.
The outright trading volume of Government securities was recorded at IDR11.3 trillion yesterday, declining from Friday’s trading volume of IDR19.6 trillion, and also lower than the month-to-date average daily trading volume of IDR14.0 trillion. SPN12220106 and FR0082 were the two most actively-traded series in the secondary market, with the trading volume of IDR1.6 trillion and IDR1.1 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR751.8 billion yesterday.
Bond Market Preview (Tue, 4/13)
Indonesia’s bond prices are expected to extend its downside movement in the near term amid increasing external pressure. Global market pressure increased ahead of US March inflation data release today. The market consensus expects US inflation to reach 0.5% MoM and 2.5% YoY in March, higher than previous month’s level of 0.4% MoM and 1.7% YoY. Meanwhile, core inflation is expected to reach 1.5% YoY, higher than February level of 1.3% YoY. The US stock market weakened slightly last night, where Dow Jones, S&P 500, and Nasdaq declined -0.16%, -0.02%, and -0.36%. Meanwhile, the 10-year and 30-year US Treasury yields were relatively unchanged from last week’s closing, and closed at 1.67% and 2.34% last night after Federal Reserve Chairman Jerome Powell reiterated the central bank’s commitment to maintaining loose monetary policy. The higher investors’ concerns on the US inflationary pressure going forward may also open a room for increasing yields in Indonesia’s bond market in the near term. Today’s government bond auction may also be on the investors’ radar. If the bond auction succeeds with robust demand from investors, and the government manages to issue bonds in line with its indicative target, then, it will be a positive catalyst which may limit the likelihood of significant increase in domestic bond yields.
Given the potential increase of yields in the near term, then, the government bonds such as FR0063, FR0070, FR0077, FR0086, FR0064, FR0071, FR0078, FR0087, FR0054, and FR0058 will be an attractive choice for investors.
Indonesia Bond Market News
Indonesia Government will conduct another bond auction today with the indicative target of IDR30.0 trillion. The Government will offer seven series of bonds i.e., SPN03210714 (3-month), SPN12220331 (12-month), FR0086 (5-year), FR0087 (10-year), FR0088 (15-year), FR0083 (19-year), and FR0089 (30-year). Investors’ demand is expected to be moderate as global market volatility persists. The Government is expected to be less aggressive on this auction, hence, if investors’ bid yields are much higher than the secondary market yields, then those investor’s bids may not be awarded by the Government. Taking into account the market condition in recent days, we forecast the indicative yields for today’s auction are as follow :
SPN03210714 : 3.05% – 3.20%
SPN12220331 : 3.25% – 3.40%
FR0086 : 5.65% – 5.75%
FR0087 : 6.48% – 6.58%
FR0088 : 6.40% – 6.50%
FR0083 : 7.25% – 7.35%
FR0089 : 7.00% – 7.10%
PEFINDO rating agency has affirmed the rating of idAA for PT Bussan Auto Finance (BAF) and its outstanding Bond II/2018 and Bond III/2019. The Company’s readiness to repay its maturing Bond II/2018 Series B amounting IDR500.0 billion that will mature on May 21, 2021 is supported by its cash equivalents and unused loan facility, which at end of December 2020 were recorded at IDR687.4 billion and IDR8.3 trillion, respectively. The outlook for the corporate rating is stable. According to PEFINDO, the rating reflects BAF’s very strong degree of support likelihood from the parent company, strong market position, and strong capitalization profile. However, the rating is constrained by its below average asset quality and tight competition in the industry. PEFINDO also stated that the rating may be upgraded if PEFINDO sees stronger evidence of support from its Parent, a strengthening market position, and continuous improvement in asset quality and profitability indicators. On the flip side, the rating could be downgraded if PEFINDO views a significant downward shift in support from the Parents. The rating may also be under pressure if BAF’s business profile or asset quality continue to decline substantially where it may affect the Parents’ support.