· Indonesian government bonds weakened for the week ended July 31, with yields increased by 15-35bps across the curve, while USD/IDR peaking since 1998 financial crisis. Sentiment was driven by the anticipation of interest rate increase in the US and high domestic inflation after Ied long holidays. Weak Rupiah against USD has yet negatively impacted domestic bond market as falling commodity prices keep imported inflation low. Trading volume improved to IDR10.2 trillion per day in average.
· The government conducted a regular IDR Islamic bond auction last week and absorbed IDR2.93 trillion out of incoming bids amounting IDR6.73 trillion. The government has issued a total of IDR333.3 trillion year-to-date, versus the annual gross target of IDR452.19 trillion. On top of that, the government will conduct a regular IDR bond auction with indicative target of IDR10 trillion on 4 August.
· Indonesia inflation in July was 7.26% year-on-year, similar as June. Year-to-date inflation was only 1.90% thus in line with Bank Indonesia’s target of 4% ± 1%. We expect BI to cut interest rate by 50bps in the second half of the year due to low inflation expectations and improving trade balance.
· Attractive yield offering as well as anticipation of lower inflation by year end will support domestic bond market. Stronger current account is also positive to the bond market. Hence, we view that the bond market may strengthen this week especially on the belly and tail of the curve.
· Yield spread was slightly lower in corporate bond market, especially the short maturity bonds. Most actively traded bond by volume was Duta Anggada Oct’18 (A-) while by frequency was Mitra Adiperkasa Feb’19 (AA-). Investors still preferred the highest rating and shortest maturity bonds. On the flip side interests on medium grade and longer tenor bonds increased. Market activity was stable compare to prior week where daily average volume amounting IDR500 billion.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.