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

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.

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Danareksa Weekly Report 2018, 03 April 2018 : Trailing the Decline in Global Yields
April 04, 2018 07:40 WIB

The Government bonds rallies
After the Fed funds rate was increased by 25bps to 1.75% on 21 Mar 2018, the yield on the 10-year US Treasury curve fell from 2.89% to 2.74% at the end of last week (29 Mar 2018). A similar trend was also seen in some other countries such as Germany and the UK. At the same time, the 10-year German bond yield edged down from 0.59% to 0.49%, while the 10-year UK bond yield dropped to 1.35% from 1.53% on 21 Mar 2018. Meanwhile, in the domestic bonds market, Government bond prices headed higher last week and yields declined. Last week, the Danareksa Government bonds yield index fell by 14bps to end the week at 6.33%. Hence, the total return YTD is 0.27% - the first positive YTD return since 27 Feb 2018. Meanwhile, foreign holdings of tradable Government bonds continued to increase. As of 29 March 2018, foreign holdings reached IDR858.79 trillion (39.31%) or up by IDR15.24 trillion from IDR843.55 trillion (38.98%) on 23 Mar 2018.

Change in investor preferences
The latest SUN auction was held on 27 Mar 2018 for the following series: SPN03180628, SPN12190314, FR0064, FR0065, and FR0075. Total incoming bids at the auction reached IDR35.57 trillion or down from IDR46.47 trillion in the previous SUN auction on 13 Mar 2018. As was the case in the previous SUN auction, the largest incoming bids at the latest auction were for FR0064, reaching IDR15.28 trillion. However, the latest SUN auction was different to the previous SBSN auction in respect to the investor preferences. Whereas investors preferred short tenors to medium and long tenors in the previous SBSN auction, in the latest SUN auction investors expressed a preference for both short tenors and medium tenors. From the total indicative target of IDR17 trillion, the total winning bids at the latest auction reached IDR20.70 trillion , slightly lower than the previous SUN auction’s IDR23.45 trillion. The most winning bids were for FR0064 (IDR8.45 trillion), up from IDR7.8 trillion in the previous SUN auction, followed by the SPN series and lastly FR0075. However, there were no winning bids for the FR0065 series. All in all, Government bond issuances in the first quarter of 2018 reached IDR210.98 trillion, exceeding the target of IDR194.50 trillion.

The next auction will be held on 3 Apr 2018 for the following series: SPNS04102018, PBS016, PBS002, PBS017, PBS012, PBS004 and PBS015. The total indicative target for this auction is IDR8 trillion. According to DJPPR’s website, the total target for Government bond issuances in the second quarter of 2018 is IDR151.27 trillion.

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Danareksa Weekly Report 2018, 27 Maret 2018 : Another Stormy Week
March 28, 2018 07:12 WIB

Global market uncertainties
On 21 March 2018, the Federal Reserve increased its benchmark rate by 25bps to 1.75%. In addition, the Fed also made adjustments to its macroeconomic assumptions. As such, the Fed now estimates GDP growth at the end of 2018 of 2.7% (compared to 2.5% in its forecast made in December 2017), while its forecast for the unemployment rate in December 2018 is 3.8% (compared to 3.9% previously). Meanwhile, inflation is still predicted to stand at 1.9% in December 2018.

According to the economic projection released by The Federal Reserve at the FOMC last week, the central tendency for Fed rate in 2018 was at the level of 2.1% - 2.4%. In other words, the reference rate could potentially increase 3 to 4 times in 2018 (including last week’s increase). However, some changes in the economic assumptions that tend to be more optimistic indicating the chances of Fed Rate may increase 4 times this year still relatively high. Following the announcement, the yield on the 10-year US Treasury curve fell from 2.89% on Wednesday (3/21) to 2.82% late last week (3/23).

President Donald Trump’s statement last Thursday on import tariffs on Chinese products created negative sentiment in the capital markets, especially the stock market. After the statement was released on 22 Mar 18, the Dow Jones stock index weakened 1.77% the next day. Asides from potential trade wars, another concerns of the market is that Trump’s statement could prompt China to sell-off US Treasuries. At the end of January 2018, China still held the largest amount of US Treasuries, i.e. around US$1.17 trillion, or about 19% of the total foreign holdings.

The Government yield increases
After the increase in Government bond prices in the previous week, prices began to fall again last week. This is reflected in the Danareksa Government bonds yield index which increased by 9bps last week. As such, after recording a positive return in the previous week, a negative weekly return was recorded last week. The weekly return was -0.54bps, while the YTD return was -0.70bps. Meanwhile, on 23 March 2018, the total amount of Government tradable securities reached IDR2,163 trillion or up by IDR17.34 trillion compared to the previous week. The amount of Foreign investor holding rose by IDR5.59 trillion, but the proportion fell by 0.05% to 38.98%

The Fed’s decision last week is predicted to pressure the US treasury volatility levels. On the other hand, the increasing trend of foreign ownership on IDR Tradable Government SBN during the last week is expected to continue. Although it will be limited, but market movements expected to improve during this week. Based on our yield curve valuation model, the IDR 10-year Government bond yield is estimated around 6.65% - 6.85% this week.

Investors still prefer short tenors to long tenors
The last auction of SBSN was held on 20 Mar 2018 for the following series: SPNS07092018, PBS016, PBS002, PBS017, PBS012, and PBS004. Total incoming bids at the last auction reached IDR13.06 trillion, or higher than at the previous SBSN auction on 6 March 2018 when total incoming bids reached IDR8.62 trillion. More specifically, the largest amount of incoming bids were for PBS016 (IDR4.98 trillion), followed by SPNS07092018 (IDR4.81 trillion). This indicates that investors still prefer short-tenors to long-tenors. From the total indicative target of IDR8 trillion, the total winning bids at the auction reached IDR8.9 trillion or higher than at the previous SBSN auction (IDR5.10 trillion). The most winning bids were for PBS016 (IDR4.63 trillion), followed by SPNS07092018 (IDR3 trillion). However, there were no winning bids for PBS012.

The auction will be held again on 27 Mar 2018 for the following series: SPN03180628, SPN12190314, FR0064, FR0065, and FR0075. The total indicative target for this auction is IDR17 trillion with a maximum target of IDR25.5 trillion.

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Weekly Report Oct 2017
Country's FCLT Rating
S & P BBB-
Moody's Baa3
Fitch BBB-

Key Market Editor
BI Rate 4.25%
JCI 5,915.00
IDR 13.52
Inflation Sep 2017(%YoY) 3.72%

Market Outstanding
Government Bond IDR 2,060.70 bn
Corporate Bond IDR 371.60 bn

Last Week Trading Volume
Government Bond IDR 73.32 bn
Corporate Bond IDR 4.85 bn

Government Bond Indices
Price Index 134.87
Yield Index 6.23%
Total Return 557.70

Benchmark Yield
FR0061 5 Year 6.19%
FR0059 10 Year 6.53%
FR0074 15 Year 7.13%
FR0072 20 Year 7.32%