Daily Bond Market Commentary (7-Mar): Inline with Global, Rupiah Asset Class Fell due to Risk-Off Sentiment from Russia-Ukraine War; Lower Sukuk Auction Target

In line with global, the rupiah asset class closed lower on Monday as the market was still worried about the Russia-Ukraine war. The JCI fell by 0.9% and closed at 6,869.1 (-0.3% MTD or +4.4% YTD), with solid trading volume at Rp20.6tn (vs. Rp13.6tn average daily trading YTD). Foreign investors reported a slight net outflow of Rp77.5bn (still inflow of Rp4.5tn MTD or +Rp28.1tn YTD). Meanwhile, Asian equity indices closed sharply lower, with the Nikkei and Hang Seng indexes falling, by 2.9% and 3.9%, respectively, to 25,221.4 (-12.9% YTD) and 21,057.6 (-10% YTD). The rupiah also depreciated by 0.1% to Rp14,408/USD (depreciated by 0.3% MTD or depreciated by 1.1% YTD) as the DXY index continued rising to >99, the highest since May-2020, benefiting from safe-haven bids from the Russia-Ukraine war.

INDOGB yields continued to go up, with foreign still reporting net sell, at Rp3n, mostly from non-benchmark series (-Rp2.7tn). This marked the sixth consecutive day of foreign net sell, totaling Rp15.1tn, based on the CTP PLTE data. According to Bloomberg, the 5-yr FR90 benchmark series traded at 98.15 (-0.4%) or yielded 5.55% (+9.2 bps), the 10-yr FR91 at 97.25 (-0.68%) or yielded 6.75% (+9.2 bps), the 15-yr FR93 at 97.6 (-0.92%) or yielded 6.63% (+9.6 bps), and the 20-yr FR92 at 100.72 (-0.91%) or yielded 7.06% (+8.6 bps). Meanwhile, regarding the 10-yr RoI USD global bond that will mature in Mar-2031, its price fell slightly to 91.4 (-0.12%), yielding 2.94% (+1.5 bps), and the 5-yr CDS went up to 126.31 (+9.79 bps).

The latest DMO bond flow data was as of 4-Mar (reflecting trading on 2-Mar), wherein foreign ownership in government bonds fell to Rp887.09tn or 18.6% of the total outstanding (outflow of Rp9.5tn MTD or –Rp5.9tn YTD). YTD, the biggest net buyer of government bonds (incl. sukuk) is BI at Rp157.5tn (from SKB III burden-sharing at Rp156.5tn in Dec-2021, with settlement date on 3-Jan-2022), followed by insurance & pension fund at Rp56.2tn. Retail and other investors also reported net buys at Rp32.3tn (mostly coming from ORI-21 issuances) and Rp23.5tn, respectively. Onshore banks also became a net buyer, at Rp1.7tn YTD. Meanwhile, mutual funds still reported net sell, at Rp7.5tn YTD.

From the bond fund flows data as of 4-Mar (settlement date of the fifth bond auction this year), we estimate non-bank institutions were (still) the biggest net buyer in the bond auction on 1-Mar, totaling Rp8.9tn or 46.9% of total bond issuances, followed by onshore banks at Rp8.8tn (46.3% of total issuances). With relatively solid demand from onshore investors during the auction, BI’s participation was stably low at only Rp1.1tn (5.7% of total issuances).

As a comparison between the first 5 bond auctions this year vs. the same period in 2021, this year’s bond issuances through auction were 32.4% lower than in the same period last year (Rp117tn vs. Rp173tn). Onshore banks were still the biggest net buyer at Rp49.5tn YTD (or 42.3% of total issuances YTD 2022 vs. 51.4% in the same period last year). The significant increase was from non-bank institutions, which reported net buy at Rp48.3tn YTD through auction (or 41.3% of total issuances YTD 2022 vs. only 19.5% in the same period last year). Foreign’s buying portion also increased to 11.3% (vs. 8.2% last year). Meanwhile, BI has only bought Rp5.1tn YTD or only 4.3% of total issuances (vs. 19.9% in the same period last year).

The government will hold another sukuk auction on 8-Mar, targeting to issue Rp9tn, lower than the previous sukuk auction target, at Rp11tn. As scheduled, the government will offer 6-mo SPNS, 2.4-yr PBS031 (reopening), 4.4-yr PBS032 (reopening), 12-yr PBS029 (reopening), 17.3-yr PBS034 (reopening), 25.3-yr PBS033 (reopening). We predict the total demand may be lower than in the previous sukuk auction, following the last conventional bond auction, ranging Rp23tn-28tn.


Russia will be excluded from all of JPMorgan’s fixed income indexes on March 31, the bank said in a statement on Monday, joining rival index providers that had excluded Russian securities from their indexes after Moscow’s invasion of Ukraine.

Global assets worth $842 billion are benchmarked against JPMorgan’s indexes, according to the bank. Russia has a weighting of 0.89% in the EMBIG Diversified index, and a 1.03% weighting in the ESG version of the index.

https://www.reuters.com/business/finance/russia-will-be-excluded-all-jpmorgan-fixed-income-indexes-statement-2022-03-07/#:~:text=NEW%20YORK%2C%20March%207%20(Reuters,after%20Moscow’s%20invasion%20of%20Ukraine.

(Source: Mandiri Sekuritas)

The best and worst EM local currency against USD performance since Russia-Ukraine war on 24-Feb

10-yr INDOGB yields went up but were still manageable compared to other EM countries

From the bond fund flows data as of 4-Mar (settlement date of the fifth bond auction this year), we estimate non-bank institutions were (still) the biggest net buyer in the bond auction on 1-Mar, totaling Rp8.9tn or 46.9% of total bond issuances, followed by onshore banks at Rp8.8tn (46.3% of total issuances). With relatively solid demand from onshore investors during the auction, BI’s participation was stably low at only Rp1.1tn (5.7% of total issuances).

As a comparison between the first 5 bond auctions this year vs. the same period in 2021, this year’s bond issuances through auction were 32.4% lower than in the same period last year (Rp117tn vs. Rp173tn). Onshore banks were still the biggest net buyer at Rp49.5tn YTD (or 42.3% of total issuances YTD 2022 vs. 51.4% in the same period last year). The significant increase was from non-bank institutions, which reported net buy at Rp48.3tn YTD through auction (or 41.3% of total issuances YTD 2022 vs. only 19.5% in the same period last year). Foreign’s buying portion also increased to 11.3% (vs. 8.2% last year). Meanwhile, BI has only bought Rp5.1tn YTD or only 4.3% of total issuances (vs. 19.9% in the same period last year).

(Source: Mandiri Sekuritas)

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