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Weekly Update
Danareksa Debt Research Weekly Report, 8 May 2018 : Surging CDS
May 08, 2018 17:11

Surging CDS

Global market conditions
After briefly hitting a high of 3.03% on 25 Apr 2018, the US Treasury yield declined to a level below 3%. As of 7 May 2018, the US Treasury yield stood at 2.95%. Oil prices continued to trend higher. The Brent oil price was recorded at USD 75.47 per barrel, up 2.2% from the previous week. The WTI oil price rose by 3.9% to USD 70.73 per barrel. Meanwhile, the yield spread between the 10-year and 2-year US Treasuries (or yield slope) fell further last week from 47bps to 46bps, resulting in a flatter yield curve.
In terms of the rupiah/US dollar exchange rate, the rupiah weakened further. As of 7 May 2018, the exchange rate was recorded at Rp14,001 per USD or depreciating by 0.77% from the previous week. However, the level of rupiah volatility was lower than in the previous week. The average difference between the highest and lowest rupiah values was 38 points, or down from the previous week’s average of 63 points. Meanwhile, foreign ownership declined by Rp2.92 trillion over the week to Rp845.31 trillion as of May 4, 2018.

Indonesia’s bond market
In Indonesia, the level of risk as reflected in the CDS increased last week. The 5-yr CDS rose by 20bps to 126bps as of 7 May 2018. At the same time, the 10yr CDS jumped by 24bps to 203bps. However, based on the Danareksa Government Yield Index, Government bond yields were only up by 8bps from 6.54% on 27 Apr 2018 to 6.62% on 7 May 2018.

Results of the latest auction
The latest SBSN auction was held on 2 May 2018 for the following series: SPNS03112018, PBS016, PBS002, PBS017, PBS012, PBS004, and PBS015. Total incoming bids at the auction only reached IDR5.53 trillion or down significantly from IDR10.17 trillion at the previous SBSN auction held on 17 Apr 2018. As was the case in the previous SBSN auction, the largest amount of incoming bids at the latest auction were for the SPNS series, reaching IDR3.44 trillion albeit down from IDR4.32 trillion in the previous SBSN auction. From the total indicative target of IDR8 trillion, the total winning bids at the latest SBSN auction only reached IDR1.38 trillion or far lower than at the previous SBSN auction (IDR6.32 trillion). The most winning bids were for SPNS03112018 (IDR0.65 trillion), followed by PBS002, PBS016 and PBS017. However, there were no winning bids for PBS012, PBS004, and PBS015. The next auction will be held on 8 May 2018 for the following series: SPN12180809, SPN12190510, FR0063, FR0065, and FR0075. The total indicative target for this auction is IDR17 trillion with the maximum target of IDR25.5 trillion.