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• June-2023: Keeping The Optimism to Perform Solidly as The Interest Rate Hike Cycle Nears its End
  We believe solidity in the bond market will continue until the end of the year. The solid domestic demand base is supported by attractive pricing as it offers higher real fixed returns and is more secure in the current uncertain and high-interest environment. In addition, the spread is relatively high compared to several other developing countries, supported by a stable sovereign rating and fiscal improvements toward a more sustainable direction. So, in our opinion, the domestic market remains on the global investor target radar. We actually expect a positive boost from monetary policy, but not much, considering the thinner spread between domestic interest rates and international markets. More detail ...
• April-2023: Positive Rally Has Done Hope It Doesn’t Get Sluggish
  We expect the positive performance to persist in 3Q2023, although not as high as in 2Q2023. A slowing inflation environment should be supportive as the outlook for looser monetary conditions opens up, which supports rising bond prices. In addition, demand will remain solid, especially from domestic, considering the uncertainty on global financial markets is still high. Government debt will still be the favorite against this backdrop over riskier assets. In addition, we expect foreign funds to continue pursuing the domestic market given the higher returns, sovereign rating at investment grade, and stable rupiah. We expect the fiscal to be on a better path of sustainability by achieving a lower deficit after increasing during the pandemic, which will support the debt market from the supply side and sovereign rating. More detail ...
• February-2023: The Outlook for The Bond Market is Stable Amidst The Uncertainty
  We expect the government bond market to perform stably through the end of the first half of 2023. Domestic demand is strong, with government bonds becoming a more attractive option than other investments amid the current uncertainty. In addition, we expect foreign capital will enter, considering higher yields and the sovereign rating to be reaffirmed at investment grade. In addition, we expect the current account surplus will last into 1H2023, supporting the rupiah to remain stable. However, the market will still face high volatility amidst the transitional uncertainties in the world's growth prospects. Developed countries are still facing stubborn inflation rates to fall. Despite the slowdown, the percentage is still far above the target amid the tight labor market. Even though interest rate increases will likely be milder, the market is waiting for when the central bank will start to reverse its monetary policy. Turmoil in the banking sector in developed countries and the protracted geopolitical crisis will also be watched out for in the future. More detail ...
• December-2022: Starting in 2023: Where will The Bonds Market be Headed in The First Quarter?
  We expect the domestic bond market to face continued volatility in the first quarter of 2023. While we hope for positive foreign capital inflows for FY2023, their flows are expected to remain volatile as central banks in advanced economies still show a willingness to raise interest rates, although at a milder level, due to lingering inflationary pressures. Thus, the latest trend on the economic data released in 1Q2023 will significantly determine when they will raise interest rates again and how long they will hold high-interest rates. Thus, market participants will be looking forward to it to formulate an investment strategy. As a result, we don't expect them to take long positions yet. And the latest capital inflows at least illustrate where foreigners are hunting for short-term tenors and selling long-term tenors. Even though the market will still be volatile, we expect a subdued performance in the government bond market at the beginning of the year. Attractive pricing and solid domestic demand will underpin performance. Unfortunately, we saw a risk to performance earlier this year. In addition to volatile foreign flows, the market will face supply risks due to the front-loading strategy and high supply. More detail ...
• October-2022: Successfully Maintaining Performance in a Volatile Market
  We believe the domestic bond market will continue to maintain its performance during a volatile market. We see inflation lower than anticipated and lower than in developed economies prompting central banks to avoid aggressive monetary tightening. In addition, the trade balance surplus - and also because the domestic stock market remains attractive as the economy recovers more strongly - reduces translational risk pressure from foreign investment outflows in the bond market. Then the solid domestic demand supported the market performance, significantly offsetting the correction during investors relinquishing their holdings. More detail ...
• August-2022: Positive Amidst The Investment Cycle Shift
  Higher yields are inevitable as monetary normalization towards a tighter direction is not over yet. In addition, policy normalization has also been continuing in the domestic market, with most recently, the central bank raising policy rates. We expect translation risk to remain low considering the central bank's strong commitment to maintaining stability and the trade balance surplus. More detail ...
• June-2022: Banking Outlook in 2022: Continuing Gradual Recovery Trend
  We are of the view that the banking growth prospect will be selective. Higher tier banks will still benefit from the stronger ability in deposit collection, lower-cost funding, and higher loss provision, enabling them to be significantly more competitive. However, given that the economic recovery is more in a gradual fashion, the number of quality debtors has not recovered to the pre-pandemic level, meaning that the number of loan takeovers will still be high. This also means that growth in stronger banks comes at the expense of business contraction in other banks and will also affect their profitability. More detail ...
• April-2022: Expect Yield to Peak Soon
  We are in the view that the upward pressure is likely to persist for some time to come due to tighter monetary policy, geopolitical risks, and portfolio shifts, which are negative factors for the domestic bond market. And the increase took place not only in Indonesia but also in other countries. And, compared to them, the Indonesian bond market remains attractive due to positive real yields and well-maintained fundamentals. More detail ...
• February-2022: More Pressure on Board in The Near Future
  We believe that pressures on yields will intensify due to stronger negative external sentiment and tighter domestic monetary policy, which will begin normalization at the beginning of the first quarter of 2022. We expect yields to move in the range of 6.38%-6.74% with a tendency to the upper limit. Although we see some positive catalysts, an increase in yields is inevitable. More detail ...
• December-2021: Starting to Feel Upward Pressure on Yields
  We view that an upward trend at the beginning of the year is inevitable amid strong external pressures, where central banks in developed countries, particularly the US, have begun to take steps to tighten monetary policy. While domestic fundamentals are expected to remain stable, with inflation and interest rates remaining unchanged in the early months of 2022, such external sentiments have impacted upward pressure on government bond yields. In addition, we also view that translation risk, particularly from the trade balance and oil prices, is another source of pressure on bond yields. As a result, based on the Bloomberg consensus, government bond yields for the benchmark tenor, 10 years, are expected to move higher in the range of 6.380%-6.520% in the first quarter of 2022. More detail ...
• October-2021: Maintaining Performance Until The End Of The Year
  We view that the trend of government bond yields will remain low until the end of 2021. With the support of low-interest rates and a stable rupiah, we expect the benchmark yield to be around 6.24% in the near future. We also expect the risk premium, as reflected in Indonesia’s credit default swaps (CDS), to remain below 100. New supply is also expected to start to slow down as the government’s budget ends. More detail ...
• August-2021: Stable Performance Prospect But at Higher Volatility
  We view the bond market to perform steadily in the short term but at the risk of higher volatility. The prevailing low-interest rates and stable rupiah will support its future performance. The central bank’s policy to absorb government bonds also supports the bond market, which faces an ample supply due to a widening budget deficit. We also believe that domestic investors will maintain their allocation in the government bond market amid uncertainty and abundant liquidity. However, we see a stronger US monetary policy tightening sentiment creating more volatility ahead. More detail ...
• June-2021: The Market is Moving at a Stable Level Recently
  We still maintain a positive view of trends in recent weeks. We are also aware that short-term external sentiment remains to be a source of concern. Economic data progress in the United States remains a sentiment for global financial markets, especially since the market is also anticipating a faster monetary policy tightening. Meanwhile, the economy in several developed countries has remained weak, as reflected in their core inflations, indicating that the easing of economic policies will remain in place. The slower pace of economic recovery than earlier expectation is also another concern, especially related to the prospect of corporate bonds issuance. Overall, Indonesia is still attractive to foreign investors from the medium-term perspective because it offers high yields. The sovereign rating, maintained at an investment grade, also reflects its strong fundamentals. More detail ...
• April-2021: Volatility Amid Global Sentiments
  We view the recent correction in the government bonds market as due mainly to short-term external sentiment. Investors expect policy normalization to materialize sooner in the United States, given the latest strong inflation figures, triggering capital outflows and raising the bond yield pricing in Indonesia. We believe Indonesia still has the opportunity to perform positively considering the high foreign interest because Indonesia offers high yields and good fundamentals, as reflected in the latest release of the sovereign rating and stronger economic growth data. However, the sentiment for policy normalization in developed countries has become more potent, induced by the implementation of vaccination programs and loose economic policy stance, encouraging more immediate economic recovery and reducing economic stimulus. More detail ...
• February-2021: Cautiously Optimists Towards Recovery
  We expect the performance of the Indonesian government bond market to remain stable. We foresee the demand for government bonds to remain robust and prices to remain attractive to collect. Economic stimulus creates abundant liquidity in the economy, indicating a lot of funds are still seeking higher and safer returns. We consider domestic investors still favor government bonds amid the uncertainty of economic recovery and the recent resurgence of new cases of COVID-19. Investors are still expecting stronger signals on improvement in the real sector’s performance before reallocating investment to riskier instruments such as stocks and corporate bonds. We also believe that foreign investor demand will also remain positive considering the high returns and stable rupiah. More detail ...
• December-2020: Global Financial Markets Remain Conducive to Foreign Investment Inflows
  We believe that external sentiment will continue to support the Indonesian bond market's performance in the short term. Global investors are optimistic that the rapid economic recovery is on track. The encouraging development of the COVID19 vaccine is a positive sentiment representing a leading indicator that the economic recovery will materialize in the near future. Another driving factor contributing to the accelerated recovery of the global economy is the economic stimulus. More detail ...
• October-2020: Corporate Bond Yield Rose Slightly as Investors Demanded Higher Premiums
  Corporate bond yields tended to rise at the end of the second quarter of 2020. Compared to the end of July 2020, the yield on corporate bonds with an AAA rating increased by 40-85 basis points. As of October 9, 2020, the yield for a one-year tenor rose 40 bps to 5,621%, and three-year and five-year tenors increased 62 bps and 85 bps to 7.191% and 7.699%. Weakening household demand weighed on company financial profiles, increasing the risk of default, and encouraging investors to demand higher premiums. More detail ...
• August-2020: Corporate Bonds Effective Yield of Corporate Bonds Fell In Line with Government Bonds
  Low government bond yields pushed down corporate bond yields, which should make new funding costs less expensive. The effective yields of three-year and five-year corporate bonds fell from 8.043% and 8.598% at the end of March 2020 to 6.561% and 7.172 respectively, on August 7, 2020. More detail ...
• June-2020: Easing Economic Policy Amid The COVID-19 Pandemic
  We expect continued loose economic policies in the foreseeable future. Many countries are wary of the possibility of a recession due to the COVID-19 pandemic, which means we see the potential for global interest rates to remain low in line with the easing of monetary policy. More detail ...
• April-2020: The Countercyclical Policy Effect on the
  PEFINDO is of the view that soon after the World Health Organization (WHO) declared COVID-19 a pandemic on March 11, the global financial market rapidly moved into unprecedented territory. The yield on Indonesia’s 10-year government bond jumped 140 basis points (bps) from 6.97% on March 11 to 8.37% on March 24. Pressure further increased when global oil prices tumbled below zero for the first time in history. Luckily, the countercyclical policy response with ultra loose monetary policy and fiscal stimuli from many countries, including Indonesia, gives rise to expectations that economic conditions would soon ease and economies will start to recover. More detail ...
• February-2020: Yields Lower But Prefer to Owe Abroad
  Before they began crawling up with foreign investor capital outflows, yields dropped quite significantly at the beginning of this year. But a low yield does not necessarily encourage the issuance of corporate debt securities in the domestic market. According to Bloomberg data, the effective yield of three-year and five-year tenor corporate bonds dropped by 62 bps and 30 bps year-to-date, respectively, to 6.728% and 7.242% as of March 2, 2020. More detail ...
• December-2019: Although corporate bond yields have fallen, corporate debt coupons are still resistant to going down to a comparable rate.
  We see this because the market is not liquid and demand is smaller than the government bond market. Many institutional investors still favor the government debt market; as a result they still have high returns to absorb the corporate debt. They usually also buy and hold bonds until maturity rather than transacting them for capital gains. More detail ...
• October-2019: Corporate Bonds
  We see the issuance of debt securities as increasingly lively toward the close of 2019. As of November 27, 2019, the issuance for the year totaled IDR129.4 trillion, and for the full year of 2019 it is will exceed the previous year’s total of IDR132.4 trillion. More detail ...
• August-2019: Corporate Bonds
  We expect issuance costs to be lower in the near term. Lower interest rates and benchmark yields are catalysts to reduce funding costs in the next few months. Based on IBPA data, corporate bond yields for major tenors, three years and five years, closed at 7,698% and 7,940% as of September 26, 2019, down 153bps and 131bps, respectively. More detail ...
• June-2019: Corporate Bond Market
  We expect the positive trend in the government bond market to boost the performance of the corporate bond market. Corporate bond yields continued to fall, heading to their lowest point in the past three years. As of July 16, 2019, yields for the three-year and five-year tenored AAA-rated corporate bonds were 7.407% and 7.777%, respectively, dropping by 183 bps and 147 bps YtD. More detail ...
• April-2019: High Costs Reduce New Issuance
  At the beginning of 2019, apart from the higher cost of funds, presidential and legislative elections also encouraged companies to wait and see. Even though the effective yields of corporate bonds have dropped, there was still a slight pause to be effective in establishing corporate bond coupons (Exhibit 9). Based on Bloomberg data, the effective yield of corporate bonds ranked AAA with a three-year tenor to 8,347% as of April 25, 2019, down 89 basis points from the end of the previous year. For the same rating of a five-year tenor, the yield fell 79 basis points to 8.464%. More detail ...
• February-2019: Multifinance Industry
  We are of the view that the growth outlook for the multifinance financing industry is still challenging. Funding is becoming tighter as interest rates increase, adding to the challenge from the disruption by financial technology companies (fintech). More detail ...
• December-2018: Corporate Bond Forecast For 2019
  The issuance of corporate bonds in 2019 is forecasted to reach IDR135.2 trillion, relatively stable compared to 2018 (see Exhibit 6). Although the prospects for 2019 are quite good, a number of factors are expected to challenge the corporate debt market, particularly the impact of the increase in benchmark interest rates, the wait-and-see approach among investors, and stricter regulations. More detail ...
• October-2018: Corporate Bond Performance Lacks Foreign Sentiment
  The corporate bond market is performing quite well with a positive return year-to-date, although still below 2.0%. Market exposure is not as big as in government bonds as foreign ownership is not too large. more ... For further information please register on our website. More detail ...
• August -2018: Corporate Bond Market
  forward, not only in terms of more expensive funding costs but also due to the tightening of regulations by the Financial Services Authority (OJK). At the same time, the depreciation of the rupiah may also limit expansion plans. Thus, we expect corporate bond issuance to be more limited in the next few months. more ... For further information please register on our website. More detail ...
• June-2018: Corporate Bonds
  Financial markets have entered the era of higher interest rates. With rising government yields, corporate bond yields also began increasing. By the end of June 2018, three-year corporate bonds for AAA-rated companies were trading at 9.179%, an increase of 152 basis points from its position at the end of March 2018, while five-year tenor bonds saw their yield increase by 161 bps to 9.128%. For the lower BBB rating, the yield increased 153 bps and 158 bps to 12.500% and 12.909%, respectively, for the three- and five-year tenors. more ... For further information please register on our website. More detail ...
• April-2018: Corporate bonds: new issuance remains high amid underperformance pressures
  Following trend in government bonds, the effective yield of corporate bonds also climbed. As of April 30, 2018, for AAA rated issuers, yield has risen to 7,941% (+28 bps) and 8.004% (+49 bps) for 3 and 5 year tenor, respectively. Capital gain of corporate bond (indicated in the change of INDOBEX Total Return Index) fell 0.6% month to month (MoM). On year to date basis, corporate bond market still recorded a positive return of 0.7% YTD, better than the government bonds in line with the weaker capital outflow sentiment. more ... For further information please register on our website. More detail ...
• February-2018: New Record High Issuance In Early 2018
  Corporate bonds set a record issuance of IDR18.7 trillion in the first two months of 2018, more than double the IDR8.9 trillion issued in the same period last year. In terms of type, the issuances were dominated by conventional corporate bonds worth IDR 17.9 trillion, while the rest was sukuk. more ... For further information please register on our website. More detail ...
• December-2017: Corporate Bond Market
  New issuance 2018 potentially exceeds 2017. We expect the issuance of new corporate bonds in 2018 continuing to posted a new record, albeit at a lower growth. We forecast the issuance of new corporate bonds to reach up to IDR155.7 trillion-IDR158.5 trillion with the best scenario at IDR158.0 trillion in 2018. It is slighly higher than IDR155.7 trillion (+ 36.6% YoY) in 2017. more ... For further information please register on our website. More detail ...
• October 2017: Corporate Bond Market Heading for new issuance record
  The corporate bond market is heading toward a new issuance record. Based on Indonesian Securities Custodian data, the issuance of new corporate bonds reached IDR104.7 trillion as of September 2017. It is expected to continue to increase and will likely exceed our previous expectations (IDR119 trillion) in line with the need for substantial refinancing. IDR26.6 trillion in bonds will mature in October-December 2017 from 30 issuers. more ... For further information please register on our website. More detail ...
• August -2017: Corporate Bond Market
  With bond issuance until the middle of this year on track, it could be higher than last year’s total of IDR114.12 trillion. As of July 2017, corporate bond issuance reached IDR84.6 trillion or 74% of the previous year's realization, mostly dominated by the financial sector (IDR54 trillion or 63.8% of total issuance). The banking sector issued the biggest at IDR32.9 trillion (38.9% of total issuance), financing companies issued IDR21.1 trillion (24.5%), followed by the construction sector (IDR6.6 trillion) and the telecommunications sector (IDR5.9 trillion). more ... For further information please register on our website. More detail ...
• June 2017: Corporate Bond Update
  Positive gains to continue In the secondary market, corporate bonds reportedly gained positive returns during the first five months of 2017. In May 2017, the market posted a 1.1% mtm return. In total, the corporate bond market generated 6.3% in capital gains from January to May 2017. Mutual funds still dominated net buy transactions in the bond market. In May 2017, mutual funds posted net purchases of IDR1.9 trillion, and a total of IDR13.1 trillion for the January-May period. Currently, mutual funds dominate corporate bond ownership with a 28.6% market share worth IDR94.8 trillion, followed by pension funds (21.8%, IDR72.2 trillion), banks (20.4%, IDR67.5%), and insurance firms (17.6%, IDR58.5 trillion). more ... For further information please register on our website. More detail ...
• April 2017: Corporate bond Update
  Yields decrease in line with benchmark government bonds Lower government bond yields prompted corporate bonds to decline. For tenors of 10 years, the effective yield of an AAA-rated bond fell by 61 bps to 8.894%. For tenors of 1, 3, and 5 years, the decline ranged between 16-51 bps and closed at 7.550%, 8.350% and 8.535% on March 31, 2017, respectively. Meanwhile, for BBB-rated bonds, the yield for short-medium term tenors (1-5 years) decreased by 52-58 bps to 10.339%-12.220%. For 10-year tenors, yield was down by 48 bps. More detail ...
• February 2017 : Indonesia’s Bond Market Highlights Yield Curve Bullish
  The yield curve up to mid-February 2017 for Indonesia’s bond market has been bullish, with short-medium term maturities showing a greater decline than longer-term maturities. For a tenor of one to 10 years, the yield declined at an average of 37 bps, while for a tenor of 10-20 years, the decline was 13 bps. As of February 22, 2017, the benchmark yield closed at 7.539%, down by 37 bps. We are of the view that liquidity in the domestic financial market has been relatively abundant in line with an improved fiscal budget balance, the tax amnesty program, and improved economic fundamentals. We also see that the foreign portfolio is still flowing into the bond market, in line with abundant liquidity in the global market. More detail ...
• December 2016 : Bond Market Outlook - Government Bonds
  Low, but rising over volatility. We forecast government bond yield to remain at a low level in 2017. The yield curve will bullishly flatten where the medium to longer-term tenor will be more attractive than the medium term. Based on our projections, the yields for one-year and three-year tenors will be traded at 5.956% - 7.982% and 6.621% - 8.479%, with medians of 6.984% and 7.499%, respectively. The median for longer-term tenors, i.e. seven-years and 10-year, are 7.658% and 7.714%, with a deviation of 85 - 90 bps, respectively. More detail ...
• October 2016 : Bond Market Update
  The yield curve shifted downward in response to positive sentiment from the external and domestic markets. We expect the recent benchmark rate cut to drag down the yield curve by 70-100 bps in the next two months. We acknowledge that the risks might weigh on this expectation, particularly uncertainty over a US Federal Reserve (Fed) funds rate (FFR) hike (investors may hold investments and wait for the results of the Fed meeting on November 1 to 2, 2016) and the large supply of government bonds. More detail ...
• August 2016 : Bond Market Update - Government Bond Update
  Continued Capital Inflow to Emerging Market. The yield curve dropped in July 2016 in response to positive internal and external sentiments. As of July 29, 2016, the decline in government bond yield ranged from 32 - 62 bps compared to the previous month, with a tendency for a larger correction on the medium-term tenor (5 - 9 years). The 10-year benchmark bond was down by 50 bps, while the 2-year, short-term tenor was down by 49 bps. More detail ...
• June 2016 : Bonds Market
  Government Bond Market Update. We are of the view that the third quarter of 2016 will continue to be favorable for the bond market. We expect bonds will continue to rally as there is room for Bank Indonesia to lower its benchmark rate (at 25-50 bps) in line with recent low inflation. We forecast the yield curve to shift downwards by 22-48 bps in 1Q2016. Externally, negative sentiment from the US market is expected to ease due to deferment of Fed Fund Rate (FFR) hike in the second quarter 2016. More detail ...
• April 2016 : Bonds Market
  Government Bonds Update, March 2016. Indonesia's economy will still face challenges from external factors such as the weakening of global economic growth, a decline in exports and a decline in world commodity prices. The impact of the weakening of global economic growth on the weakening of Indonesia's economic growth in 2016 is predicted by the Ministry of Finance at 5.3%, assuming an exchange rate of IDR13,900/USD, oil prices standing at USD50/barrel is predicted to mean the tax revenue on mining results will not be as high as estimated in the 2016 state budget. More detail ...
• June 2015 : Bond Market Outlook
  Indonesia's economy in the first quarter of 2015 experienced a variety of challenges, namely the uncertainly of the global economic recovery, the slowing economic growth, the inflationary pressures, and the depreciation of rupiah against USD. These challenges caused macroeconomic assumptions underlying the preparation of the government's budget in 2015 were no longer realistic. As a consequence, the realization of the government budget in the first quarter 2015 were also affected. More detail ...
• April 2015: Bond Market Outlook
  The Indonesian economy is still facing external risks as declining commodity prices, possible increase of the fed fund rate, uncertainty of the global economic recovery, and the weakening of the economic growth of China. The external risks also affect both assumptions and structure of the central government budget. More detail ...
• February 2015 : Bond Market Outlook - January 2015 Outlook
  In dealing with the double deficit risk aforementioned, Indonesian financial market has the potential to serve as a buffering system. Hereby, funds inflow form FDI and portfolio investments can fill the financial hole emerging from Saving-Investment Gap. Debt instrument liabilities value of portfolio investments on Balance of Payment's Capital Account has continually increased from USD12,796 million in 2012 to USD19,614 million in 1-3Q14 (see Appendix). More detail ...
• September 2014 : Election rally vs. higher bonds supply and widening current account deficit numbers
  After reporting losses in May and June that were in line with seasonal pattern by 1.72%, the government rupiah bond prices recovered in July on presidential election rally by 1.31%, after pro market Jokowi is leading over Prabowo. However the bond prices reversed (again) in August due to higher current account deficit data in 2Q that was released in mid August. According to HSBC bond index, the total return from investing in government rupiah bond market (including coupon interest income) posted +2.06% and –0.08% in July and August respectively. Thus, ytd total return from investing in government rupiah bonds posted gain 7.77% (vs. -15.93% the same period last year). Since the rupiah also appreciated by more than 3.83%ytd against USD, then the total return from investing in government rupiah bonds went even higher to 11.6%ytd - in USD terms – the highest compared with other Asian countries. More detail ...
• July 2014 : First half review: Still in line with our expectation
  As we wrote in the bond market outlook report in January 2014, we expected volatility in government bonds would increase early this year due to government front loading policy, period prior to election and US Quantitative Easing tapering result in 2014 (See: IDR Government bond market review and outlook 2013-2014: Another challenging year for bond market). From 8.45% at the start of the year, the benchmark 10-year rupiah government bond’s yield rose to as high as 9.18% in 27-Jan and then fell to as low as 7.83% before closing 6-June at 8.03%. While the short end tenor i.e. 2-yr rupiah government bond yield rose the highest this year at 8.06% in 6-Jan then fell the lowest at 6.98% in 21-Feb and closing 6-June at 7.34%, or fell 30bps compared with end of last year. More detail ...
• May 2014 : Bond market rally to run out of steam
  Government IDR bond market still continuing their rally in March and April this year, however the rally significantly lower in April following lower demand after on average their yield to maturity has dropped below than 8% - the lowest level since Nov-2013. According to HSBC bond index, total return investing in government IDR bond market posted gained 3.5% and 1.2% in March and April respectively. Thus ytd total return investing in government IDR bonds posted gained 6.2% (vs. only 0.5% the same period last year). With IDR also appreciated by more than 5%ytd against US dollar, then total return investing in government IDR bonds even higher to 11.2% - in USD terms – it’s more than four times than average performance Asian local currency government bonds that only reported gained of 2.61%. More detail ...
• March 2014 : Strong rally on foreign fund inflows
  As we wrote in the previous report, volatility in government bonds would increase early this year due to front loading policy, prior to election period and QE tapering in the. (See: IDR Government bond market review and outlook 2013-2014: Another challenging year for bond market). According to HSBC bond index, after falling by 2.1% in January, the total return of investing in government bonds (including coupon payment) rebounded significantly by 3.6% in February. Therefore, from Jan-Feb, total return in the government’s rupiah bonds was 1.5%, much higher than the same period last year (+0.23%) and the second highest among Asian local currency government bond gain of 0.8% (Figure 1). More detail ...
• November 2013 : IDR Government bond market review and outlook: Is the worst over?
  Five factors that gave negative sentiment to rupiah government bond market this year looks diminishing. First, inflation trend we seen declining trend. Although pressure on inflation might still coming from the significant rupiah’s weakness this year and higher core inflation, but we think yoy inflation will not be higher than 9%. More detail ...
• September 2013 : Bond market dropped significantly
  Bond market always sells-off in past fuel subsidy cut episode, but it is temporary. Mirroring to what happened in 2005 and 2008 when government increasing fuel price subsidy, it will followed by increasing inflation, weakening rupiah currency and rising BI rate, but it is temporary. Impact to inflation usually takes on average only four months to reach their peaked. While for BI rate, Bank Indonesia will be pause interest rate hike when inflation has reaches their peaked. More detail ...
• July 2013 : Watch out for foreign fund outflows
  Government bond yields continued to increase on foreign fund outflows. As we wrote in the previous report, volatility in the government bonds would increase due to the large foreign holding and the fact that yields had fallen to their historical lowest levels last year (See: IDR Government bond market review and outlook February-March 2013: Higher volatility on higher inflation). According to HSBC bond index, after falling by 0.8% in 1Q2013, the total return of investing in government bonds (including coupon payment) rebounded in April but dropped again in May that erased all gains in April and February. Therefore, from Jan-May, total return of the government's rupiah bonds continued to drop by 2%, this was lower compared with overall Asia local currency government bonds that booked losses of 0.5%.Another risk was expectation of the rupiah’s further weakening or expectation of unwinding Quantitative Easing by the Fed and worsening global economic condition that can trigger continuing foreign fund outflows. Foreigners still reported the highest net buy YTD of Rp32.4tn (or 34% of total outstanding or almost 70% of full year net buy in 2012) as of May. More detail ...
• May 2013 : Higher volatility on higher inflation
  Yields might continue to be low, but risks might increase. As we expected volatility in government bonds will increased this year as foreign investors dominated the most and the yields has recorded the lowest ever last year. However, we still maintain our view that government bond yields will not increase significantly, as we believe Bank Indonesia will likely remain as a big potential buyer of government bonds to speed up its plan to use the bonds as monetary instrument to replace SBI. More detail ...
• March 2013 : Bearish on higher inflation expectation
  We maintain our view that government bond yields will not increase significantly as we believe Bank Indonesia will likely remain as a big potential buyer of government bonds to speed up its plan to use the bonds as monetary instrument to replace SBI. In 2012, BI only bought IDR19tn, much lower than 2011 that reached IDR43tn as there's not significant outflow from foreign investors in 2012. More detail ...
• January 2013: IDR Bond Market Outlook 2013
  The government’s rupiah bond market chalked strong gain in the last three years although the return continued to decline as the yields have extremely low compared with last year. According to the Inter Dealer Market Association (IDMA) from Bloomberg, on average government bonds reported capital gain of 2.39%YTD (as of 14-Dec), thus sending the total return (including coupon payment) higher by 10.9%. However, the return is still lower than the performance of the last two-year average of 22% and the average return of 15.6% in the last seven years due to lower yield starting this year. However, in terms of USD the return was lower to only 4.7% as the rupiah weakened 6.2% against the USD this year. Demand for longer tenors that still give higher yields continued to increase, making the yield curve bullish flattening this year. The 2-yr and 10-yr yields traded at 4.65% and 5.25% or down by 52bps and 78bps respectively from last year. Meanwhile for 2012, the 2-yr and 10-yr fell by 70bps and 158bps to 5.16% and 6.03% respectively. More detail ...
• October 2012 : Rupiah government bonds proved their resiliency
  BI and foreigners are key drivers of bond yields movement. We believe that foreign fund inflows and stock-building of government bonds by Bank Indonesia will be the most significant factor to push yields lower as the yield curve has flattened. Thus, we still believe the key has to be watched carefully is the rupiah’s movement. We still believe the rupiah's volatility will remain high in the near term. However, if the local currency is stable at the current level i.e. 9,500-9,600, we believe foreign inflow will continue.BI and foreigners are key drivers of bond yields movement. We believe that foreign fund inflows and stock-building of government bonds by Bank Indonesia will be the most significant factor to push yields lower as the yield curve has flattened. Thus, we still believe the key has to be watched carefully is the rupiah’s movement. We still believe the rupiah's volatility will remain high in the near term. However, if the local currency is stable at the current level i.e. 9,500-9,600, we believe foreign inflow will continue. More detail ...
• August 2012 : Rebounded on foreign fund inflows will it be sustained?
  Counting on foreign fund 2011. Insurance companies mostly bought government bonds in the primary market. The rebound was supported by solid trading volume, indicating strong demand. Trading volume was reported high at IDR9tn average per day in the Jun-Jul (vs. IDR6tn Apr-May and IDR8tn ytd). The most actively traded security was still the long-end benchmark series such as the 20-yr FR58 and 10-yr FR61 which were traded at 120 (+4.9%) and 109.77 (+5.5%) yielding 6.45% and 5.68% respectively compared with the last two months. The transactions in the two bonds accounted for almost 40% of the total transaction volume in the June-July period. More detail ...
• April 2012 : The government’s rupiah bonds rally was slowing
  Delay of increasing fuel price might give negative sentiments to bonds market. The House of Representatives finally rejected the plan to raise the price of Premium subsidized fuel from IDR4,500 to IDR6,000 per liter, but instead approved a conditional increase on 30-March. The revised state budget law passed states that the government can increase the fuel price if the average of the ICP in the previous six months is 15% above USD105 per barrel an assumption of the ICP set in the budget. It means that government has the authority to go ahead with the 33% fuel price hike if the six-month ICP average goes beyond USD120.75. More detail ...
• February 2012 : IDR Bond Market Outlook 2012 - Who will buy bonds next year?
  The domestic bond market posted strong gains in 2011 beating stock market and time deposit performances. In the last three years the government bond market booked 21.0% gains on average per year, much higher than the average long-term returns in the last eight years of 16.0%. The government bond market in 2011 beat stocks and deposit whose returns were only 2.5% and 4.8% respectively. It’s similar to 2008 amid the Lehman Brothers collapse, the bond market performance beat stock market (5.4% vs. -51.0%) – although in terms of average longterm returns, stocks still give the highest return i.e. 32.0% in the last ten years, but the stocks entails higher risks.Higher issuance of government bonds is inevitable as the government uses this as the main sources of funding for budget deficit, debt refinancing and finance infrastructure projects. The budget deficit is expected to be 1.5% of GDP or IDR124tn in 2012. Although the deficit is expected lower than in 2011 (IDR150.8tn), the net issuance of government bonds is expected to be higher of around IDR134.6tn as it plan to reduce offshore loan by IDR1.9tn. As maturing bonds in 2012 will reach IDR91.1tn, the government is projected to issue IDR240.4tn in gross amount, including bond buyback. More detail ...
• October 2011 :The bond market pared gains due to global sell-off in Sept on worsening European debt
  After increasing significantly in early 3Q, the government’s IDR bond prices dropped in September due to global selloff on worsening European debt problem. Average yield curve fell by 62bps from end of June 2011. The 10-year yield fell the lowest to 6.45% in 9-Sept but increased to 6.92% by 3Q 2011 as foreigners took profit. Overall bonds still reported capital gains of 1.30% in 3Q according to IDMA. More detail ...
• July 2011 : Rising volatility on lingering global uncertainty
  Government’s rupiah bond market continued rallying in 2Q, made the total return back to the positive territory. The bond market was still resilent despite of global pressures. Beside foreign fund inflows, flush liquidity in the domesic banking system also supported the rally. Foreigners became the major holders of government’s rupiah bonds beating banks for the first time in May 2011. Increasing foreign ownership was also followed by rising volatility in the local bond market when there is instability in the global front. There were three global factors that influenced the local bond market, Worsening European debt crisis, the end of the second quantitive easing, the US debt ceiling and threat of economic overheating in China. More detail ...
• January 2011 : Increase in bond market volatility in line with global market fluctuation
  The bond market volatility increased significantly in the 4Q 2010 due to fluctuation in the global market such as spreading of Europe debt crisis and increasing US Treasury yield. In addition, threat of domestic inflation also increased. Because of foreign components’ dominance in the bond market, fluctuation in the global market would impact domestic bond market significantly. Another critical issue to the bond market was capital control in response to heavy capital inflow. More detail ...
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