FR0068 Yield Touch Level 7.62% amidst SUN Auction. Indonesia Government Bond (Surat Utang Negara, SUN) in Rupiah is closed corrected, amid the decline of global market expectations of potential decline in US interest rates. It’s expected that expectations are due to US workforce data, which is above expectations, and has successfully disappointed the market that predicts interest rates going down. Price reductions are also coincided with the period ahead of tomorrow’s routine auction. It can be a stop for the consecutive SUN price rally that occurred since late May.
The decline in the price of the SUN was not in line with the corrections occurring in other emerging market government bond. Data Refinitiv shows that the price of the SUN is reflect in the four benchmark series that also increases the yield level. Price movements and yield bonds are mutually opposite in the secondary market. The yield that is the reference to the investment results obtain by investors. It also more common as a reference to bond transactions compare to price because it reflects coupons, tenor, and risk in one figure.
SUN is the rupiah conventional government securities (Surat Berharga Negara, SBN) which is the most crowd trade in the domestic market, so it can reflect the conditions of the bond market in general. The four reference series are the FR0077 5Y, FR0078 10Y, FR0068 15Y, and FR0079 20Y tenor. The most weakening reference series is the FR0068 which has a tenor of 15Y with a rise in yield of 4 bps to 7.62%. The magnitude of 100 bps equals to 1%.
The market correction of the government bonds today is reflect in the fair bond price, in which the Indonesia Bond Pricing Agency (IBPA) or Penilai Harga Efek Indonesia (PHEI) INDOBeX Government Total Return Index remains weakened. The index drop 0.15 points (0.06%) to 258.14 from the position yesterday 259.29. The SBN correction today also makes a 10Y bond spread by the government of US Treasury the similar tenor reaches 520 bps, expanding from the position yesterday 517 bps. The US Treasury Yield 10Y down again up to 2.03% of the 2.04% yesterday’s position.
Related to the portion of investor in SBN Market, Directorate General of Budget Financing and Risk Management (DJPPR) data last show the foreign investor grasp IDR991.06Trn SBN, or 38.9% of the total circulating IDR2,547Trn base on data per July 4. The ownership rate is still positive IDR97.81Trn compare to the final position of December IDR893.25Trn. The percentage is still up from 37.71% in the same period. The correction in the debt market today is also happening in the equity market and rupiah in the forex market, which respectively 0.34% and 0.18%.