BNIS Fixed Income Daily Report of May 25, 2021.
Bond Market Review (Tue,5/24)
Indonesia’s local currency bond prices varied with a tendency to weaken yesterday. The 5-year benchmark SUN yield (FR0090) was closed at 6.26%(+4bp), while the 10-year benchmark SUN yield (FR0091) was recorded at 7.20%(+4bp).
The outright trading volume of Government securities was recorded at IDR17.6 trillion yesterday, increasing from Monday’s trading volume of IDR12.2 trillion. Increasing trading volume was also triggered by a successful Bond auction held by the Government. FR0091 and FR0090 are the most actively traded series in the secondary market, with the trading volume of IDR4.3 trillion and IDR2.3 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR533.7 billion.
The Rupiah exchange rate against the US Dollar weakened to the level of IDR14,661/USD from the close on Monday at the level of IDR14,672/USD.
Bond Market Preview (Wed,5/25)
Bank Indonesia Board of Governors Meeting agreed on 23rd and 24th May 2022 to hold the BI 7-Day Reverse Repo Rate at 3.50%, while also keeping the Deposit Facility (DF) rates at 2.75% and Lending Facility (LF) rates at 4.25%. The central bank sees its decision still consistent with the need to manage inflation and maintain exchange rate stability, while continuing to foster economic growth amid escalating external pressures stemming from the geopolitical tensions between Russia and Ukraine as well as faster monetary policy normalisation in several advanced and developing economies.
Bank Indonesia also announced that it will accelerate its liquidity policy normalisation by incrementally raising Rupiah reserve requirements. Bank Indonesia will raise the Rupiah reserve requirements for conventional commercial banks: 1) From 5.0% currently to 6.0% on 1st June 2022; 2) from 6.0% to 7.5% on 1st July 2022; 3) from 7.5% to 9.0% on 1st September 2022. As for sharia banks and sharia business units, Bank Indonesia will raise the Rupiah reserve requirements: 1) From 4.0% currently to 4.5% on 1st June 2022; 2) from 4.5% to 6.0% on 1st July 2022; 3) from 6.0% to 7.5% on 1st September 2022.
Based on the central bank’s evaluation, the first phase of the higher Rupiah reserve requirements and the RR incentive introduced on 1st March 2022 has not eroded the banking industry’s ability to disburse loans/financing to the corporate sector or purchase SBN to fund the State Revenue and Expenditure Budget (APBN). In April 2022, the ratio of liquid assets to third-party funds remained high at 29.38% vs pre-pandemic level of 21%, supporting the banking industry’s ability to disburse loans, with credit growth expanding 9.10% (yoy) in the reporting period. Strong 10.11% (yoy) deposit growth supported ample liquidity to support the credit growth.
From the global market, US Treasury yield curve changed its direction again, shifting lower than its position on Monday. The yield on 2-year UST fell 15bp to 2.50% while the yield on 10-year UST recorded 10bp decline to 2.76% level. Compared to its level at the end of 2021, the UST 10-year yield has recorded a 124bp increase.
The 10-year SUN yield curve (GIDN10YR) ended yesterday trading sessions at 7.22% level, 84bp higher from its level at the end of 2021. The current yield level is still within our estimated weekly range of 7.19% – 7.33%. Taking into account the current market conditions and yield curve valuation, we estimate that FR0070, FR0044, FR0047, FR0054, FR0091, FR0068, FR0080, FR0072, FR0045, FR0093, FR0050, FR0079 will be attractive to investors.
Indonesia Bond Market News
Government Debt Securities Auction Result on Tuesday May 24, 2022. The Government has conducted auction for Government Debt Securities on Tuesday May 24, 2022, for series SPN03220825, SPN12230526, FR0090, FR0091, FR0093, FR0092 and FR0089. The total incoming bids amounted to IDR39.42 trillion, much higher than the incoming bids in the previous SUN auction which reached IDR19.74 trillion. The total nominal won from the seven series offered is IDR 20 trillion.
PEFINDO rating agency has affirmed its idAA- rating for PT Kimia Farma Tbk (KAEF). The outlook for the corporate rating has been revised to stable from negative, reflecting PEFINDO’s expectation of an improving credit matrix, particularly its capital structure and cash flow protection measures in the near to medium term, as a combined result of KAEF’s EBITDA growth acceleration and lower debt level. At the same time, PEFINDO also affirmed the idAA- rating to its Medium-Term Notes (MTN) I/2019 and the idAA-(sy) rating to MTN I/2019 Syariah Mudharabah that will mature on July 10, 2022. KAEF will repay the maturing MTNs of total IDR500 billion using its internal cash and/or existing bank loan facility. As of December 31, 2021, it had cash and cash equivalents of IDR748.5 billion.