BNIS Fixed Income Daily Report of October 6, 2021.
Bond Market Review (Tue, 10/5)
Indonesia’s local currency bond prices extended their gains yesterday. Most government bond yields declined 1 – 5 bps along the curve, in which, the 10-year Government bond yield fell 2 bps to 6.18%. In contrast with the IDR-denominated bonds, the USD-denominated bond yields surged yesterday, in which INDON-26, INDON-31, and INDON-51 yields were closed at 1.46% (+4 bps), 2.37% (+6 bps), and 3.38% (+6 bps), respectively. The IDR strengthened marginally to IDR14.253/USD yesterday, compared to Monday’s closing level of IDR14,267/USD.
The outright trading volume of Government securities was recorded at IDR15.5 trillion yesterday, higher than Monday’s trading volume of IDR8.0 trillion. FR0087 and FR0070 were the two most actively-traded series in the secondary market, with the trading volume of IDR2.4 trillion and IDR2.1 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR317.2 billion yesterday.
Bond Market Preview (Wed, 10/6)
The likelihood of lower yields in Indonesia’s bond market is expected to continue in the near term amid easing external pressure. Global market pressure eased along with increasing investors’ optimism on the prospect of the US economic recovery following a stronger services industry data. The US ISM non-manufacturing PMI was recorded at 61.9 in September, increasing from the previous month’s level of 61.7, and also higher than consensus expectation of 60.0. Easing global market pressure also can be spotted from the declining VIX index to 21.3 last night, from the previous day’s level of 23.0. Increasing global optimism also spurred investors to enter the riskier assets, reducing demand on the safe-haven assets, which can be seen from the US stock market strengthening last night (Dow Jones +0.92%; S&P 500 +1.05%; Nasdaq +1.25%), which was followed by increasing the 10-year and 30-year US Treasury yields to 1.53% (+5 bps) and 2.10% (+5 bps), respectively. Increasing global optimism may also add a positive catalyst which will open a room for further declines in Indonesia’s bond yields. The potential yield declines in Indonesian bonds may also be supported by robust investors’ liquidity coupled with strong appetite to the domestic bond market. These can be seen from solid investors’ demand on yesterday’s sukuk auction, where total investor’s bids reached IDR46.1 trillion, higher than average bids in the 18 previous sukuk auctions of IDR35.5 trillion.
Given the possibility of declining Indonesia’s bond yields in the near term, then, the belly and long-end series of government bonds such as FR0086, FR0090, FR0071, FR0078, FR0087, FR0054, FR0091, FR0068, FR0072, FR0079, FR0083, and FR0092 will be more attractive for investors.
Indonesia Bond Market News
Indonesia’s Government issued IDR5.0 trillion of Sukuk through yesterday’s sukuk auction, in line with its indicative target. Total investors’ bids on yesterday’s sukuk auction reached IDR46.1 trillion, slightly higher than the previous sukuk auction’s bid of IDR45.4 trillion, and also higher than average investor bids in the 18 previous sukuk auctions since early this year of IDR35.5 trillion. This was indicating that investors’ appetite for the domestic market remained solid. Investors’ appetite was stronger on the PBS0029 and PBS0031 series, where total investor bids on those series reached IDR11.5 trillion and IDR10.3 trillion, respectively. Following yesterday’s sukuk auction, year-to-date, the government has successfully issued IDR1041.1 trillion of securities.
PT Astra Sedaya Finance offers a coupon up to 5.30% for the issuance of Shelf Registration Bond V Astra Sedaya Finance Phase III 2021 totaling to IDR2.0 trillion. The bonds will be issued in two series i.e., the 370-day series A with a coupon of 3.75% will be issued as much as IDR540.94 billion, and the 3-year series B with a coupon of 5.30% will be issued as much as IDR1.459 trillion. This issuance is part of Shelf Registration Bond V with a total issuance target of IDR10.0 trillion. PEFINDO rating agency has assigned the rating of idAAA for the company’s bonds. The public offering period will be held on October 14-15, 2021, while the electronic distribution and IDX listing will be conducted on October 22 and 25, 2021, respectively.