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Weekly Update
Danareksa Weekly Report 2018, 17 April 2018 : Observing the Impact from Rating Upgrade : Part I
April 17, 2018 17:30

Moody’s upgrades Government of Indonesia’s rating
Moody’s Investor Service upgraded the Government of Indonesia’s ratings to Baa2 from Baa3 with a stable outlook on 13 April 2018. The upgrade to Baa2 reflects greater credibility in Indonesia and the establishment of a more effective policy framework to ensure macroeconomic stability. Along with the build-up of financial buffers, prudent fiscal and monetary policy have strengthened Moody’s confidence that Indonesia’s capacity to respond to shocks has improved.
Indonesian bonds market: stable yields, foreign ownership increases and the CDS Indonesia declines
As of 13 April 2018, based on the Danareksa Government bonds yield index, the yield on Government bonds stood at 6.18%, or unchanged from its level at the end of previous week. Over the week, the yield on Government bonds touched a low of 6.15% on 11 Apr 2018 before climbing to 6.18% at the end of the week. By comparison, the yield on the US Treasury edged up from 2.77% on 6 Apr 2018 to 2.82% on 13 Apr 2018.

In terms of the foreign ownership of Indonesian Government bonds, it edged up during the first week of April in nominal terms. In the second week, it experienced a decrease to IDR870.66 trillion on 11 April 2018 from IDR871.64 trillion on 10 April 2018. After that, it rose again to IDR873.28 trillion (39.76% of the total outstanding) on 13 Apr 2018. Meanwhile as of 13 April 2018, the level of risk as measured by the 5-year and 10-year CDS declined to 97.02bps and 166.65bps after peaking on 23 Mar 2018 at 107.26bps and 174.87bps, respectively. This week, the yield on the 10-year benchmark, the FR0064, is expected to range between 6.50% - 6.65%.

Results of the latest auction
The latest SUN auction was held on 10 April 2018 for the following series: SPN12180712, SPN12190411, FR0063, FR0064, and FR0065. Total incoming bids at the auction reached IDR37.72 trillion or up from IDR35.57 trillion in the previous SUN auction held on 27 Mar 2018. As was the case in the previous SUN auction, the largest incoming bids at the latest auction were for FR0064, reaching IDR11.13 trillion yet down from IDR15.28 trillion in the previous SUN auction. From the total indicative target of IDR17 trillion, the total winning bids at the latest SUN auction reached IDR21.85trillion or slightly higher than the previous SUN auction’s IDR20.70 trillion. The most winning bids were for FR0063 (IDR6.50 trillion), followed by the SPN series, FR0064 and FR0065. The next auction will be held on 17 Apr 2018 for the following series: SPNS04102018, PBS016, PBS002, PBS017, PBS012, PBS004 and PBS015. The total indicative target for this auction is IDR8 trillion.