Daily Commentary (15-Nov): Rupiah asset class was up on Wednesday. The 5yr FR63 was traded at 91.2 (+0.1%), yielding 7.98% (-1.9 bps); the 10yr FR64 at 87.3 (+0.6%), yielding 8.06% (-6.8 bps); the 15yr FR65 at 85.7 (+0.6%), yielding 8.35% (-6.5 bps); and the 20yr FR75 at 90.4 (+0.9%), yielding 8.52% (-8.8 bps).
According to PLTE data, foreign is coming back to the bond market with a reported net buy of Rp602bn, – mostly coming from non-benchmark series; as for benchmark series, foreign (still) reported net buy of Rp221bn. Foreign ownership in government bond based on settlement date as of 12-Nov (reflecting trading on 8-Nov) was Rp881.9tn (inflow of Rp17.6tn mtd or +Rp45.7tn ytd) or 37% of total outstanding.
JCI also rose 0.4% to 5,858.3 (+0.5% mtd or -7.8% ytd) with foreign investors reported at net inflow of Rp530.8bn (inflow of Rp6.5tn mtd and outflow of Rp48.1tn ytd). Rupiah also appreciated by 0.12% to Rp14,787/USD (appreciated 2.7% mtd or depreciated 9% ytd).
Our fair value model forecast for 10yr INDOGB yield was 8.22% (range: 8.02-8.42%), assuming 10yr UST yield at 3.1%, BI 7DRR rate at 5.75%, 5yr CDS at 110, and rupiah at 14,700 against USD. The fair value might be lower than our forecast if there’s expectation of rupiah to continue to appreciate against USD or UST yields continue to lower, thus possibly attracting more foreign fund inflows to INDOGB.
On the global market, US stocks fell again in another volatile session. Dow Jones decreased 0.81% to 25,080 and S&P 500 fell 0.76% to 2,701. Meanwhile, the 10-yr yield shed 3 bps to 3.12%. USD Index fell 0.3% to 96.8.and WTI rose 0.8% to settle at USD 56.14/bbl to end a 12-session losing streak. (Source: Mandiri Sekuritas)