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Danareksa Debt Research Weekly Report, 09 October 2018 : UST Yield: How High Will It Go?
October 09, 2018 17:21 WIB

UST Yield: How High Will It Go?

US: Permanent tax cuts
The US economy grew more rapidly after the tax cuts in January 2018, with unemployment falling to its lowest rate since 1969. Wages rose in September 2018 according to data from the Bureau of Labor Statistics (BLS). The increase in wages and the increase in world oil prices (the price of Brent oil increased by 8% and WTI by 5% during September) means the Fed will be more aggressive with 4 Fed Fund Rate (FFR) hikes expected rather than 3. The most recent FFR hike was carried out on September 26, 2018.

Meanwhile, the tax cuts caused the US State Budget deficit to widen. In turn, this pushed the government to issue more debt, thereby leading to increases in US Treasury yields. Based on an estimate by the Congressional Budget Office (CBO) released on October 5, 2018, the US State Budget deficit for 2018 will reach $ 782 billion, an increase from 2017’s deficit of $666 billion. This deficit increased to 3.9% of 2018 GDP or up from 3.5% in 2017. As of October 5, 2018, the US 10-year Treasury yield was recorded at 3.23% or up 18 bps during the week and up 83 bps during 2018. This is the 10-year US Treasury yield’s highest level since May 2011. Meanwhile, the US Congress passed the bill that the tax rate deduction in the early 2018 became permanent.

Pressure on the Indonesian market
In line with the increase in the 10-year US Treasury yield, according to the Danareksa Government Bonds yield index, the yield on Indonesian Government bonds also increased. As of 5 October 2018, the Government bond yield was recorded at 7.65% or an increase of 11 bps compared to the previous week’s level. Meanwhile, as of 4 October 2018, foreign ownership of tradable SBN increased slightly by IDR0.52 trillion from IDR850.85 trillion on September 28, 2018 to IDR851.37 trillion after reaching IDR856.30 trillion on October 2, 2018.
UST Yield: How High Will It Go?

Last week, the Rupiah weakened against the US Dollar by 1.84% from IDR14,903 per USD to IDR15,183 per USD. This is its lowest level since July 1998. In terms of volatility, as measured by the difference between the highest and the lowest levels, USD/IDR volatility was higher than in the previous week. The average weekly rupiah volatility last week was 49 points compared to 40 points the week before.
Government bonds auction
The Government held its latest SBSN auction on 2 October 2018 for the SPNS03042019, SPNS03072019, PBS016, PBS019, PBS012, and PBS015 series. There was also a new SBSN series called PBS019. Total incoming bids rose to Rp10.39 trillion from IDR8.22 trillion in the previous SBSN auction on 18 September 2018. Meanwhile, the total winning bids reached IDR5.11 trillion. The largest bids were for the short tenors such as the SPNS03042019 series amounting to IDR3.86 trillion and SPNS03072019 amounting to IDR2.5 trillion. The largest winning bid was for PBS016 amounting to IDR1.5 trillion. Details of the proceeds from the auction can be seen in Exhibit 4.

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Danareksa Debt Research Weekly Report, 02 October 2018 : Federal Funds Rate Hike: More to Come
October 02, 2018 16:37 WIB

Federal Funds Rate Hike: More to Come

The Fed raises rates
At the Federal Open Market Committee (FOMC) meeting on September 26, 2018, the Fed hiked interest rates for the third time by 25 bps to 2% - 2.25%. The Fed’s move came on the back of tighter labor market conditions and brisker economic activities. During 2018, the Fed Rate has been increased by 75bps in total and another rate hike is expected at the end of the year.

In line with market expectation, at the Bank Indonesia Board of Governors’ Meeting (RDG) on 26-27 September 2018, BI raised its 7 Days Reverse Repo Rate by 25bps to 5.75%. This increase is consistent with efforts aimed at keeping the current account deficit within a manageable limit while maintaining the attractiveness of the domestic financial markets, thus strengthening Indonesia’s external resilience despite the widespread global uncertainty. Since the end of 2017, the BI 7D RRR has now been raised on 5 (five) occasions or by 150bps in total.

Yields declined as foreigners recorded net buying
The Danareksa Government Bonds Yield Index declined to 7.54% on September 28, 2018 from 7.61% at the end of the previous week. The weekly return recorded was 0.65%. The decline in yields was accompanied by an increase in foreign holdings by Rp9 trillion from IDR841 trillion (36.77%) on 21 September 2018 to Rp850 trillion (36.83%) on 27 September 2018. By comparison, the 10-year US Treasury yield edged down by 2bps from 3.07% to 3.05% in the same period after earlier reaching 3.10% on 25 September 2018.

Last week, the rupiah weakened relative to the US Dollar (losing 0.58% from IDR14,817 per USD to IDR14,903 per USD). As for the currency’s volatility, as measured by the difference between the lowest and highest levels, the USD/IDR volatility was fairly low last week. The average volatility reached 40 points last week compared to 53 points in the previous week.

Government bonds auction and the new PBS019 series
The Government held its latest auction on 25 September 2018 for the SPN03181226, SPN12190606, FR0077, FR0078, FR0065, and FR0075 series. Total incoming bids rose significantly to Rp51.54 trillion from IDR36.88 trillion in the previous SUN auction on 12 September 2018. This may reflect the launch of two new series: FR0077 and FR0078. Meanwhile, the total awarded bids reached IDR20 trillion or the same as the maximum target. The largest bid was for the SPN03181226 series amounting to IDR15 trillion and then FR0078 amounting to IDR12 trillion. The largest bid awarded was for FR0078 amounting to IDR8 trillion. Details of the proceeds from the auction are contained in Exhibit 3.

Through the SBSN auction that will be held on 2 October 2018, the government will issue the new bond series PBS019. These bonds will mature on 15 September 2023. In the auction on 2 October 2018, the government will hold an auction for the SPNS03042019, SPNS03072019, PBS016, PBS019, PBS012, and PBS015 series.

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Danareksa Debt Research Weekly Report, 21 August 2018 : Another Rate Hike
August 21, 2018 17:16 WIB

Another Rate Hike

Raising BI’s 7-Day Reverse Repo Rate
The past few months have been marked by greater global economic uncertainty with varying growth rates in major economies. In Indonesia, the current account deficit has increased as the growth rate has accelerated on the back of strong domestic demand. Rupiah volatility has eased, however, while stability of the financial system has been maintained. Against this backdrop, Bank Indonesia raised its 7-Day Reverse Repo rate by 25bps to 5.50%. This decision is consistent with efforts to ensure the attractiveness of the domestic financial markets whilst also keeping the current account deficit within an acceptable threshold.

Increase in Government bond yields
The 10-year US Treasury moved sideways last week. It stood at 2.87% on 17 August 2018, the same level at the end of the previous week. By comparison, the Indonesian bond yield headed higher last week. The Danareksa Government Bonds Yield Index stood at 7.16% as of 10 August 2018, increasing by 21bps to 7.37% on 16 August 2018. Commensurately, the level of risk as reflected in the CDS moved upward during last week. On 16 August 2018, the 5 year CDS rose by 10bps to 124bps and the 10 year CDS increased by 7bps to 211bps. Nonetheless, foreign holdings fell slightly by IDR2.82 trillion to IDR844.59 trillion as of 16 August 2018 amid higher rupiah volatility last week. The Rupiah weakened 0.79% last week relative to the USD from IDR14,478 per USD in 10 August 2018 to IDR14,593 per USD at the end of last week. The volatility of the rupiah as measured by the average spread between the highest and lowest levels over the week increased from 32 points to 52 points last week.

Results of the Previous Auction
The government held its latest SUN auction on 14 August 2018 for the SPN12181115, SPN12190606, FR0063, FR0064, FR0065 and FR0075 series. The total bids received at the latest auction amounted to IDR34.38 trillion, down from IDR45.44 trillion at the previous SUN auction on 31 July 2018. Unlike the previous SUN auction, the largest amount of incoming bids last week were for the 3 month SPN series which reached IDR8.18 trillion or up from IDR7.22 trillion in the previous SUN auction. From the total SUN target issuance of IDR10 trillion, the total winning bids reached IDR16.5 trillion or down from IDR20 trillion in the previous SUN auction. The bond with the most winning bids was FR0063 (IDR3.95 trillion). Details of the auction on 14 August 2018 are shown below.

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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%