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Danareksa Debt Research Weekly Report, 04 December 2018 : Anticipating 2019
December 04, 2018 15:20 WIB

Anticipating 2019

Rupiah appreciation continued
The Rupiah has continued to strengthen against the US Dollar. During November 2018, the Rupiah strengthened by 6% against the US Dollar from IDR15,203 per USD on 31 October 2018 to IDR14,302 per 30 November 2018. Compared to last week, the Rupiah strengthened by 1.21%. In terms of volatility, the volatility of the Rupiah against the US Dollar as calculated from the average of the highest and lowest daily levels rose to 72 points last week compared to 59 points in the previous week.

Meanwhile, WTI oil prices increased slightly by 1.4% from USD 50.22 per barrel on November 23, 2018 to USD 50.93 per barrel on November 30, 2018. During November, however, WTI oil prices were significantly down by 22% from USD65.31 per barrel on 31 October 2018.

Still in a bullish trend
The Indonesian bond market remained bullish last week. The Danareksa Government Yield Index was recorded at 7.99% per 30 November 2018, or down by 10 bps from the previous week and down 59 bps compared to its level as of 31 October 2018 of 8.58%. Last week’s closing level is the lowest level since 4 October 2018.

In line with the decline in bond yields, the 10-year Indonesia CDS dropped by 17bps from 235bps on 31 October 2018 to 218bps on 30 November 2018. Meanwhile, the 10-year US Treasury declined by 14bps from 3.15% on 31 October 2018 to 3.01% on 30 November 2018. The US yield curve tended to be flatter over this period as reflected in the difference in the 10-year and 2-year yields which declined to 21bps, its lowest level since 18 August 2018 when the spread was 18bps.

Apart from the strengthening of the Rupiah, the decline in yields was also driven by foreign capital inflows. During November, foreign holdings went up significantly by IDR36.27 trillion from IDR864.32 trillion on 31 October 2018 to IDR900.59 trillion on 30 November 2018. The total increase in foreign holdings up to 30 November 2018 was IDR64.44 trillion or an increase of 8% compared to the end of 2017, when foreign holdings stood at IDR836.15 trillion.

Plans and targets for 2019
In the 2019 State Budget draft, there were several changes in macroeconomic assumptions. First is the assumption of the Rupiah to US Dollar exchange rate from the State Budget Draft (RAPBN) which assumed an exchange rate of IDR14,400 per USD. This has been revised to IDR 15,000 per USD in the 2019 State Budget. In addition, oil lifting which was first estimated at 750 thousand barrels per day (bpd) in the 2019 RAPBN was revised to 775 thousand barrels per day (bpd) in the 2019 State Budget. The government made the changes so the State Budget is more realistic and credible. The changes in the exchange rate and oil lifting assumptions will lead to higher state revenues and expenditures, but the deficit will be maintained at the level of 1.84% of GDP.

The total debt financing needs for 2019 are IDR833.94 trillion. The proportion of financing through SBN is 92.5% and the remaining 7.5% is from loans. Government debt is prioritized in Rupiah to provide a cushion against exchange rate volatility. Thus, the proportion of foreign currency debt is 21.62% while domestic debt accounts for 78.38% of the total.

Meanwhile, the planned financing of the 2019 State Budget through the issuance of SBN (gross) is IDR825.70 trillion with the proportion of foreign exchange SBN issuances at 14%-17% of gross SBN in USD, EUR and JPY. The targeted issuances in the first semester of 2019 are 50%-60% of the gross SBN target. While for the financing in Rupiah, the issuances in Semester I 2019 are 52% of the gross SBN Rupiah target. The issuances of SBN will be conducted in 24 SUN auctions and 24 SBSN auctions as well as through non-auction mechanisms: the issuance of ORI, Sukri, SBR, and Sukuk Savings and Private Placements. In addition, the Government also upsized the issuance of retail SBN with plans to issue regular SBR and ST total 8x in a year with a maximum of IDR 5 trillion per issuance and a total target of IDR30-IDR40 trillion, whilst also issuing ORI and SUKRI total 2x in a year with IDR15-IDR20 trillion per issuance and a total target of IDR30-IDR 40 trillion.

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Danareksa Debt Research Weekly Report, 27 November 2018 : Brighter November
November 27, 2018 16:05 WIB

Brighter November

The rupiah strengthened; oil prices declined

In November, the Rupiah strengthened against the US dollar by 4% from IDR15,203 per USD at the end of October 2018 to IDR14,544 per USD on 23 November 2018. In the week beginning 16 November 2018, the rupiah strengthened by 0.47% from IDR14,612 per USD. In terms of volatility which is calculated by the weekly average of the highest and lowest levels, the volatility of the USD against the rupiah was lower last week. This was reflected in the decline in volatility from 96 points in the previous week to 59 points last week.

Meanwhile, world oil prices fell significantly during November 2018, down 21% for Brent and 23% for WTI. Last week alone, oil prices slumped by 12% for Brent to USD58.57 per barrel and by 11% for WTI to USD50.22 per barrel. The WTI price is at its lowest level since 9 October 2017 (USD 49.58 per barrel). These decline are due to high oil supply. Given these developments, the OPEC and Russia meeting scheduled to be held in December 2018 will be eagerly awaited.

Continuing bullish movement
The Indonesian bonds market remained bullish last week. The Danareksa Government Bonds Yield Index stood at 8.08% as of 23 November 2018, or down by 8bps over the week and down by 50bps compared to its level on 31 October 2018 of 8.58%. In line with the decline in yields, the 10-year Indonesian CDS was down by 5bps from 235bps on 31 October 2018 to 230bps on 23 November 2018. The 10-year US treasury yield declined by 10bps from 3.15% on 31 October 2018 to 3.05% on 23 November 2018. Apart from the strengthening of the rupiah, the decline in yields was also driven by capital inflows from foreign investors. During November, foreign ownership increased by IDR24.89 trillion from IDR864.32 trillion on 31 October 2018 to IDR889.21 trillion on 21 November 2018. In proportional terms, foreign ownership increased by 0.63%.

This year’s remaining government bond auctions have been cancelled
The government held the last SUN auction on 21 November 2018 for the SPN031900222, SPN12190801, FR0077, FR0078, FR065 and FR075 series. At the auction last week, the total incoming bids were recorded at IDR41.63 trillion. This amount was lower than at the previous SUN auction on 6 November 2018 in which the incoming bids reached IDR59.48 trillion. The total winning bids were IDR15 trillion or lower than the winning bids at the previous SUN auction. The largest number of incoming bids was for series FR0077 which amounted to IDR12.23 trillion followed by FR0078 (IDR9.82 trillion). The most winning bids were for the FR0077 series (IDR5.25 trillion) followed by FR0078 (IDR4.30 trillion). Details of the auction results can be found in Exhibit 7.

The Government were scheduled to hold four auctions by 18 December 2018: two SUN auctions and two SBSN auctions. However, based on a press release conducted by the DJPPR on 22 November 2018, the remaining SUN and SBSN auctions in 2018 have been cancelled. The cancellation of the planned issuance of SBN in the primary market was decided after considering the outlook for fulfilling the 2018 state budget financing target sourced from SBN issuances. As of 23 November 2018, the issuance of gross SBN had reached IDR768.22 trillion or 96% of the total target of IDR798.98 trillion.

Based on data from the Ministry of Finance as of 31 October 2018, state revenues reached IDR1,484 trillion or 78.3% of the 2018 state budget ceiling. This is 20% higher than the state revenues in the same period the previous year. Meanwhile, the budget deficit until October 2018 reached IDR236.99 trillion or around 1.60% percent of GDP or lower than the previous projection of 2.2%.

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Danareksa Debt Research Weekly Report, 13 November 2018 : Optimism Returns
November 13, 2018 16:38 WIB

Optimism Returns

Stronger Rupiah vs weaker Dollar
The rupiah strengthened significantly relative to the US Dollar in November by 3.45% from Rp15,203 per USD at the end of October to Rp14,678 per USD on 9 November 2018. Bank Indonesia said that the rupiah’s strength was driven by Non Deliverable Forward (NDF) instruments in the country or Domestic Non Deliverable Forward (DNDF) instruments. At the same time, the Dollar Index came under pressure as a result of the American midterm elections held on 6 November. As of the end of October 2018, the Dollar index was at its highest level since June 2017 of 97.13, before weakening by 0.2% to 96.9 during the same period. Last week, world oil prices declined by 4.5% for Brent and 4.7% for WTI to USD68.73 per barrel and USD60.19 per barrel, respectively. The decline in oil prices was triggered by higher oil production during October in several oil-producing countries (including OPEC members and non-members). This week, however, the rupiah may face some pressure given the release of Current Account Deficit data for quarter III which reached USD8.8 billion or up by 10% compared to the previous quarter of USD8 billion.

Bullish movements in Indonesian Government bond yields
The Indonesian bond market was bullish last week. The Danareksa Government Yield Index recorded a Government bonds yield of 8.18% as of 9 November 2018, or down by 26bps compared to the yield on November 2, 2018 of 8.44%. In line with the decline in yields, the 10-year Indonesian CDS dropped by 9bps from 226bps on 2 November 2018 to 217bps on 9 November 2018. Meanwhile, the 10-year US treasury declined by 3bps from 3.22% on 2 November 2018 to 3.19% on 9 November 2018, after touching its highest level since May 2011 of 3.24% on 8 November 2018. Apart from the strengthening of the rupiah, the decline in yields was also driven by capital inflows from foreign investors. Over the past week, foreign ownership increased by IDR17.81 trillion from IDR864.08 trillion on 2 November 2018 to IDR881.89 trillion on 9 November 2018. In terms of the proportion of foreign ownership, however, the proportion of foreign holdings only increased by 0.35%.

Government auction results
The Government held the last SUN auction on 6 November 2018 for the SPN031900207, SPN12191107, FR0077, FR0078, FR065 and FR075 series. At the auction last week, the total incoming bids were recorded at IDR59.48 trillion. This number was higher than the incoming bids in the previous SUN auction on 23 October 2018 which reached IDR47.55 trillion. Meanwhile, the total winning bids were IDR20 trillion, or the same as the maximum target. The largest amount of incoming bids were for series FR0078, which amounted to IDR16.64 trillion, followed by FR0077 (IDR15.08 trillion). The most winning bids were for FR0078, amounting to IDR5.95 trillion, followed by FR0065 (IDR5.35 trillion). Details of the auction results are shown in Exhibit 7. The government is scheduled to hold six more auctions by 18 December 2018 comprising three SUN auctions and three SBSN auctions.

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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%