CIMB IDR Weekly Fixed Income Market Commentary ended 30 April 2015

 
·         Indonesia government bond market weakened for the week ended Apr 30, with yields increased by about 15 to 17bps. Tight Rupiah liquidity and higher energy price were mainly the reasons behind weaker bond performance. Stronger Rupiah and higher yield on the other hand were supporting the domestic bond market. Meanwhile, average trading volume improved to about IDR10 trillion per day.
·         Government conducted a regular bond auction last week and absorbed only IDR4.85 trillion, much less than indicative target of IDR10 trillion. Auction was considered very weak, as incoming bid amounting only IDR 7.9 trillion. The average weighted yields were generated at 6.18% for 9-month T-bills, 7.63% for FR69, 7.96% for FR71 and 8.28% for FR67. At this moment, the government has issued a total of IDR198.32 trillion year-to-date, from annual gross target of IDR452 trillion.
·         This week government will conduct a regular Islamic bond auction with indicative target of IDR2 trillion, which includes 6-month T-bills, Project Based Sukuk PBS06 (maturing in 2020), PBS07 (maturing in 2040) and PBS08 (maturing in 2016).
·         Rupiah money market rate as indicated by 3-month IDR Jibor has eased down a bit to 6.87% on 4 May from 6.88% on 28 Apr. Higher money market rate has been driven by lack of fresh supply of Rupiah from Bank Indonesia’s swap auction amid Dollar buying and also higher inflation expectation due to rising oil price.
·         In our opinion, the bond market may see support, guided by the narrowing yield spread between the 3- and 10-year government bond and spread between IRS and bond. However, higher energy price and high nominal benchmark interest rate could negatively affect domestic bond market. Hence, we view that the bond market could strengthen marginally this week especially on the front-end of the curve.
·         In credit market, we saw bigger flows with average volume of IDR794 billion per day. Market focused mainly on AAA and A rated papers, the same as last week. The most actively traded bonds by volume was Sukuk Sub. Bank Muamalat Mar’23 (A) while by frequency was Agung Podomoro Aug’17 (A).