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Danareksa Weekly Report,19 September 2017 : The First Weekly Loss after Nine Straight Weeks of Gains
September 19, 2017 17:43 WIB

The Danareksa Government Bonds Yield Index rose slightly last week. After falling to 6.26% (its lowest level since July 2013) on Monday, the yield rose 9bps to end the week at 6.35%. As a result, there was a weekly loss of 0.15%. Nonetheless, as of 15 September 2017, the year-to-date Danareksa Government Bonds Total Return Index stood at 13.9%, yet lower than its performance of 17.8% during the same period last year.

Foreign investors: breaking new records
One of the main reasons behind last week’s increasing yields was the fact that bonds were overpriced. A significant increase in the foreign holdings of Government bonds shows that demand is still strong. Foreign holdings jumped by IDR23.9 trillion from IDR794.1 trillion to IDR818 trillion at the end of the week (40.4% of the total outstanding), reaching a new peak in both nominal and percentage terms. By contrast, Domestic Banks (excl. BI Reverse Repo) were net sellers to the tune of IDR16.3 trillion. As of 15 September 2017, the holdings of Domestic Banks were recorded at IDR416 trillion, or 20.5% of the total outstanding.

Banking bonds: the most briskly traded bonds
Last week’s trading in Government bonds reached IDR86.7 trillion, or down by IDR19.2 trillion compared to the previous week’s figure. Trading was dominated by short tenors (below 5-years), as they accounted for 46.6% of the overall trading. By contrast, trading in corporate bonds on the secondary market reached only IDR2.8 trillion. The bonds of banks were the most briskly traded bonds, accounting for 33.5% of the total trading in corporate bonds.

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Danareksa Monthly Report - Still Focusing On Infrastructure
September 11, 2017 11:04 WIB

Benchmark rate down by 25bps
Bank Indonesia lowered its benchmark rate by 25 bps to 4.50% on August 22nd. Looking at the movement of the Danareksa Government Bonds Yield Index, we can see a declining trend, with the government bonds yield falling by 139 bps throughout 2017 to 6.52% as of August 21st. As bond yields have continued to decline, the amount of outstanding corporate bonds has continued to increase. In August, corporate bond issuances reached IDR12.29 trillion. The bulk of the issuances were in the banking sector (IDR12.37 trillion, or 93.08% of the total issuances in August). As a result, the total issuances so far in 2017 reached IDR96.3 trillion as of August 31st.

Nothing new
As of August 31st, total outstanding government bonds reached IDR2,012.79 trillion. Foreign holdings reached 39.01% of the total, up 147bps from 37.54% as of January 3rd. In fact, in nominal terms, foreign holdings showed the highest level, reaching IDR785.14 trillion, up 17.96% from IDR 665.61 trillion at the beginning of the year. The next largest holders of government bonds are banks and insurance companies with holdings of 21.23% and 12.82%, respectively.

The number of issuances reaches 75.55% of the target issuance
During August, the Government issued a total of IDR57.83 trillion of SBN, bringing the total issuances ytd to IDR542.29 trillion as of August 31st. The total incoming bids for August reached IDR163.80 trillion and the total incoming bids for 2017 as of August 31st amounted to IDR1,294.01 trillion. Based on the 2017 Revised Budget, the issuance target for 2017 is IDR717.80 trillion. As such, total issuances have reached 75.55% of the targeted issuances.

Still focusing on infrastructure
In August, the 2018 Budget Proposal was approved by both the Government and parliament. 2018 will mark the 4th year of the implementation of Jokowi’s Nawa Cita program. The 2018 Budget has the theme “Pemerataan Pembangunan Yang Berkeadilan,” with planned expenditures of IDR2,204.4 trillion. The focus of national development in 2018 will be on:
1. Infrastructure development
2. Reduction of poverty and social inequality
3. Job creation
The Government plans to spend IDR440.9 trillion as stipulated by the mandatory spending clause of 20% of the budget. Mandatory spending will also be on healthcare (5% of the budget), with budgeted expenditures of IDR110.2 trillion.

In drafting the budget, the Government has set several macro economic indicators which have been approved by DPR, namely:

The Government targets a budget deficit of IDR325.94 trillion or 2.19% of GDP. This is lower than the targeted budget deficit for 2017 of 2.67%. In regard to debt servicing, the government has set 4 principal guidelines:
1. Prudency: with the range of debt to GDP set between
2. Minimal debt expenses: low interest to outstanding
debt r
atio (currently at 4.7%)
3. Productivity: utilizing debt for productive
expenditures only
4. Balanced: maintaining a balanced debt portfolio

To fund the deficit, the Government plans to issue SBN amounting to IDR414.73 trillion (net). Total SBN issuances in 2018 are expected to be lower than those in 2017 (IDR432.96 trillion), i.e. down by 4.4%. The amount of maturing government debt in 2018 is estimated to reach IDR325 trillion (SBN, foreign & domestic loans). Gross issuances are expected to reach IDR739.73 trillion.

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Danareksa Weekly Report, 29 August 2017 : More Stimulus to Boost the Economy
August 31, 2017 10:16 WIB

The Indonesian central bank (BI) decided to cut its benchmark interest rate, the BI 7 days Reverse Repo Rate, by 25bps from 4.75% to 4.5% at the latest Governors’ Board Meeting on August 22, 2017. Low inflationary expectations and the manageable current account deficit gave room to BI to lower its benchmark rate. The stable rupiah is another factor. Going forward, the impact of gradual increase in the Fed Rates rate to rupiah/US dollar volatility is expected to be manageable. 

Higher demand for short tenor -In line with the declining interest rates, the Danareksa Government Bonds Yield Index fell by 10bps to 6.64% over the previous week, resulting in a 0.7% weekly gain. Looking at the changes in the yield curve, the declines were dominated by short tenors (below 5 years) whose yields declined by 13bps. By comparison, the average declines in the medium and long tenors were 9bps and 6bps, respectively. Following the benchmark rate cut, the Indonesian 10-year CDS ended the week at 168bps, its lowest level since 2012.

Setting a new record
The total trading in government bonds rose significantly last week. Total trading in the secondary market reached IDR92.7 trillion (with a total of 5,652 trades), the highest weekly trading in 2017. This compares to the average trading in previous weeks of IDR53.4 trillion (with a total of 2,950 trades on average). By contrast, trading in the corporate bonds secondary market was lethargic. It declined from IDR5.3 trillion to IDR4.2 trillion.

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Weekly Report Aug 2016
Country's FCLT Rating
S & P BB+
Moody's Baa3
Fitch BBB-

Key Market Editor
BI Rate 6.50%
JCI 5,421.00
IDR 13.01
Inflation Oct 16(%YoY) 3.07%

Market Outstanding
Government Bond IDR 1.74 bn
Corporate Bond IDR 295.90 bn

Last Week Trading Volume
Government Bond IDR 40.72 bn
Corporate Bond IDR 2.35 bn

Government Bond Indices
Price Index 132.20
Yield Index 7.13%
Total Return 507.70

Benchmark Yield
FR0053 5 Year 6.82%
FR0056 10 Year 7.01%
FR0073 15 Year 7.38%
FR0072 20 Year 7.57%