Daily Commentary (14-Mar): INDOGB Yield Fell Slightly Ahead of Tuesday’s Auction; Consensus Expects Trade Surplus Continued in February

[08:49, 3/15/2022] Inge mansek: The JCI and INDOGB went up slightly ahead of Tuesday’s bond auction, while the rupiah fell against the USD. The JCI rose 0.4% to a record close of 6,952.2 (+0.9% MTD or +5.6% YTD), and foreign investors reported net inflow of Rp1.1tn (net outflow of Rp5tn MTD or net inflow of Rp18.6tn YTD). Meanwhile, Asian equity indexes closed mixed as the market continued to monitor the volatility in commodity prices. The Nikkei index rose 0.6% to 25,307.9 (-12.1% YTD), while Hang Seng index plummeted by 5% to 19,531.7 (-16.5% YTD) due to China’s surging COVID-19 wave.

INDOGB bond prices still went up, sending bond yields slightly lower as foreign returned to the bond market, totaling Rp0.1tn, according to the CTP PLTE data. According to Bloomberg, the 5-yr FR90 benchmark series traded at 98.2 (+0.03%) or yielded 5.54% (-0.7 bps), the 10-yr FR91 at 97.62 (+0.03%) or yielded 6.7% (-1 bps), the 15-yr FR93 at 97.15 (+0.11%) or yielded 6.67% (-1.2 bps), and the 20-yr FR92 at 100.31 (+0.13%) or yielded 7.09% (-1.3 bps). Meanwhile, regarding the 10-yr RoI USD global bond that will mature in Mar-2031, its price also lowered to 89.8 (-0.49%), yielding 3.16% (+6 bps), and the 5-yr CDS went up slightly to 112.92 (+0.95 bps).

The latest DMO bond flow data was as of 11-Mar (reflecting trading on 9-Mar), wherein foreign ownership in government bonds continued to fall, reaching Rp868.43tn or 18.2% of the total outstanding (outflow of Rp28.2tn MTD or –Rp24.6tn YTD). YTD, the biggest net buyer of government bonds (incl. sukuk) is BI at Rp159.1tn (from SKB III burden-sharing at Rp156.5tn in Dec-2021, with settlement date on 3-Jan-2022), followed by insurance & pension fund at Rp65.5tn. Retail and other investors also reported net buys at Rp23.7tn (mostly from ORI-21 issuances) and Rp27.4tn, respectively. Onshore banks also became a net buyer, at Rp2.1tn YTD. Meanwhile, mutual funds still reported net sell but slowing to Rp6tn YTD.

February’s trade data will be released on Tuesday. Consensus expects the trade balance to post a surplus of USD1.7bn in Feb-2022, significantly up from USD0.93bn in Jan-2022. Export growth is expected to strengthen to 37.3% YoY (vs. 25.31% YoY in Jan-2022), supported by coal export ban lift, global main commodity price increase (particularly for coal), improving demand from China along with its returning manufacturing PMI to expansion zone, and increasing Baltic Dry Index. Meanwhile, import is also expected to grow, by 40% YoY (vs. 36.77% YoY in Jan-2022) due to a jump in oil price.

The government keeps holding bond auctions amid rising risk-off sentiment. As scheduled, the government will hold another government bond auction on Tuesday, targeted to issue Rp20tn (maximum issuance: Rp30tn) or lower than the previous auction target of Rp23tn (max.:Rp34.5tn). The government will offer two SPN series, i.e., 3-mo and 1-yr tenors, and reopen five fixed-rate series, i.e., 5-yr FR0090, 10.1-yr FR0091, 15.3-yr FR0093, 20.3-yr FR0092, and 29.4-yr FR0089. Based on our auction bid regression model, we estimate total bids will still be higher than the initial target but may still be lower than in the previous auction, ranging Rp45tn-50tn.

(Source: Mandiri Sekuritas)

INDOGB “SUN” Auction Indics (15-Mar-2022)

SPN 3mo : 2.10%-2.20%

SPN 12mo : 2.65%-2.75%

FR90 : 5.49%-5.59%

FR91 : 6.66%-6.76%

FR93 : 6.65%-6.75%

FR92 : 7.04%-7.14%

FR89 : 6.95%-7.05%

The Auction time is 09.00-11.00 AM JKT time.