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Weekly Update
Danareksa Weekly Report 2018, 06 Maret 2018 : Adopting a Defensive Stance during Uncertainty
March 07, 2018 08:00

A lower return with relatively high volatility

The Indonesian bond market performance trended lower last week. The Danareksa Government Bonds Yield Index rose 11bps from 6.22% to 6.34% to record a weekly return of -0.43%. Compared to the position at the end of 2017 (YTD), the total return on Indonesian Government bonds as of 2 March 2018 was -0.2%. By comparison, in the same period, the US bond market moved sideways with relatively high volatility. After the 10-year US Treasury yield reached 2.9% on 27 February 2018, it closed at 2.86% at the end of last week or down by 2bps from the previous week.

On the foreign exchange market, the IDR/USD exchange rate depreciated with high volatility. As of 2 March 2018, the Rupiah closed at the level of IDR13,757 per USD or down by 0.7% last week. This is the Rupiah’s lowest level in weekly closed basis since February 2016, however in intraday transaction it reached IDR13.800 per USD. Meanwhile, the average spread of the highest and lowest levels (one of the indicators of volatility) increased from 11 points to 23 points last week.

Lower absorption by foreign investors
Based on the ownership data of Government bonds, the holdings of foreign investors declined. As of 1 March 2018, foreign holdings stood at IDR847.6 trillion or down by IDR8.8 trillion over the week. Compared to the position at the end of 2017, foreign holdings only grew by IDR11.5 trillion or 26% of the net total issuances in 2018. Meanwhile, during the same period of 2016 and 2017, foreign investors recorded net buying of IDR29.7 trillion or 65% of the total issuances and IDR26.8 trillion or 37% of total issuances, respectively.

Auction results: stronger demand for short tenor
On 27 February 2018, the government held its SBN auction. The bonds auctioned were: SPN03180528, SPN12190214, FR0063, FR0065, and FR0075. From the target of IDR17 trillion, the total incoming bids reached IDR41.09 trillion. The largest incoming bids were for the SPN12190214 (IDR12.48 trillion), followed by FR0063 (IDR11.06 trillion) and SPN03180528 (IDR9.14 trillion). Meanwhile, FR0065 and FR0075 received incoming bids of IDR3.07 trillion and IDR5.33 trillion respectively. The total winning bids reached IDR23.10 trillion. FR0063 received the most winning bids (IDR9.8 trillion), followed by the SPN series (IDR5 trillion each). The winning bids for FR0075 and FR0065 were IDR2.10 trillion and IDR1.20 trillion, respectively.

The government will conduct another auction on 6 March 2018 for the following SBSN series: SPNS07092018, PBS016, PBS002, PBS017, PBS012, and PBS004. The total indicative target is IDR8 trillion.