IDR: No Upgrade From S&P Just Yet!

      The initial euphoria during the S&P country review that the country could be poised for an upgrade to the coveted ‘investment’ grade quickly dissipated when the credit rating agency affirmed the country’s BB+ rating (still non-investment grade) with a positive outlook.

      The markets’ reaction was less severe and more a kneejerk. The 10Y sovereign bond yield climbed from 7.87% to 7.88% following the news before eventually settling lower to 7.85% levels at the end of the session. The equity market appeared to have discounted the S&P news with the JCI up by around 0.2%. The USDIDR ended little changed though it did bounced higher to 13680 from 13650 earlier in the day.

      The affirmation of the BB+ rating was not a market game changer. There were little expectations among market participant for a rating upgrade from S&P. Moreover, the two other major rating agencies – Fitch and Moody’s – have continued to affirm their investment grade ratings of Indonesia, helping to lessen the blow from S&P’s failure to upgrade Indonesia and puts the focus on S&P as being more conservative than its peers.