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Weekly Update
Danareksa Weekly Report 2018, 13 Feb 2018 : A Bearish Week
February 14, 2018 14:20

Rupiah: In a weakening trend
The rupiah depreciated from IDR13,452/USD on 2 February 2018 to IDR13,628/USD on 9 February 2018. Volatility was also high in this period – as can be seen in the spread from the highest to the lowest points. The average hi-lo spread on the rupiah in January 2018 was 25 points, while the average in February 2018 (month-to-date, as of 9 February 2018) increased to 56 points. In addition, the level of risk as measured by the CDS also increased – an indication that the required yield of investors also rose. As of 9 February 2018, the 5-year CDS Indonesia stood at 100bps, or up 16bps from its level at the end of 2017.

Foreign holdings decline
In line with the weakening of the rupiah and the high rupiah volatility last week, the proportion of IDR Tradable SBN held by foreigners dropped by 0.44% from 41.37% on 2 February 2018 to 40.92% on 9 February 2018. In nominal terms, the amount of foreign holdings dropped by IDR5.13 trillion from IDR867.17 trillion to IDR862.04 trillion over the period although the total amount of government bonds increased from IDR2,096.35 trillion to IDR2,106.42 trillion. Meanwhile, Bank Indonesia’s holdings (incl. reverse repo) increased by IDR1.89 trillion to IDR162.33 trillion. Similarly, the holdings of domestic investors increased significantly. They jumped by IDR17.57 trillion to IDR1,208.33 trillion during the period. Looking at the detail, domestic bank holding (excl. reverse repo) went up the most by IDR10.63 trillion.

Government bond yields rose; US Treasuries were highly volatile
The Danareksa Government bonds yield index increased by 7bps from 6.02% to 6.09% last week. Danareksa Government Bond Total Return Index recorded a loss of 0.45% last week. Nonetheless, the total return YTD reached 0.92% as of 9 February 2018 after it reached 2.03% as of 19 January 2018. Meanwhile, the 10-year US Treasury yield experienced high volatility last week. The yield reached 2.83% on 2 February 2018 but then dropped to 2.77% on 5 February 2018 before increasing again to 2.85% on 8 February 2018 and 2.83% on 9 February 2018.

In the secondary market, total trading in Government bonds last week reached IDR104.2 trillion coming from 4,702 individual transactions (an average of IDR22.2 billion per transaction). This was less than the previous week’s total trading which reached IDR128.8 trillion. By comparison, total trading in corporate bonds dropped by IDR1.2 trillion to IDR4.2 trillion during the same period.

Continued preference for short tenors
On 6 February 2018, the Government held its latest SBSN auction. The bonds auctioned comprised SPNS07082018, PBS016, PBS002, PBS017, PBS012, and PBS004. From the indicative targeted incoming bids of IDR8 trillion, the total incoming bids reached IDR20.15 trillion. The largest amount of incoming bids was for SPNS07082018 (IDR9.86 trillion), followed by PBS016 with incoming bids of IDR5.64 trillion. The results of this auction indicate that investors are still eying the short tenors. At the auction, total winning bids reached IDR10.08 trillion. PBS016 received the most winning bids (IDR4.91 trillion), followed by SPNS07082018 (IDR3 trillion). However, PBS004 received no winning bids.

The Government will hold another auction on 13 February 2018 for the following series: SPN03180514, SPN12190214, FR0064, FR0065, and FR0075. The total indicative target is IDR17 trillion with a maximum target of IDR 25.5 trillion.