FR0078 Selling Action. The price of the rupiah government bond is closed corrected in the trade Wednesday (07/10) and ended the price rally trend that occurred since May 31st. The corrections happening in the government bond market (Surat Utang Negara, SUN) are more due to technical factors after relatively no stop strengthening since late May and contrary to the usually unidirectional stock market.
SUN‘s price fall along with the corrections occurring in almost the entire global government bond market. The Refinitiv data shows that the SUN price has been reflected in the four benchmark series that also raises the yield rate.
Price movements and yield bonds are mutually opposite in the secondary market. The yield that is the reference to the investment results gained investor is also more common as a reference to bond transactions compared to the 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 crowded trade in the domestic market, so it can reflect the conditions of the bond market in general. The four reference series are FR0077 tenor 5Y, FR0078 tenor 10Y, FR0068 tenor 15Y, and FR0079 tenor 20Y.
The most weakening reference series is the FR0078 with a tenor of 10Y with a yield increase of 6.4 Bps to 7.33%. The magnitude of 100 Bps equals to 1%. The correction of the government bonds market is reflected in the prices of fair bonds, where the INDOBeX Government Total Return Index of Indonesia Bond Pricing Agency (IBPA) or Penilai Harga Efek Indonesia (PHEI) remains weakened. The index dropped 0.3 points (0.12%) to 257.77 from the position yesterday 258.07. The SBN correction today also made the rupiah bond spread of 10Y tenor with US Treasury similar tenor reached 523 Bps, expanding from the position yesterday 521 Bps. US Treasury Yield 10Y rose up to 2.09% from yesterday’s 2.05% position.
Related to the US Treasury market, it is still happening for 3 months to 10Y inversion, which is commonplace since China and the US trade war heats up in last April. Nowadays global market participants are looking forward to the inversion that occurs in the 3-month tenor up to 10Y which began to occur at the beginning of the year, as the indicator is more reiterated that the potential of the US recession is getting closer than other tenor inversions. Inversion is a condition higher yield shorter series than the longer yield series.
The inversion forms the inverted yield curve, which is a reflection of investors who are more in the US Treasury a long series than the shorter ones because of the rate there will be short term contractions, as well as indicators of potential economic pressure even to the crisis. Related to the portion of investors in the SBN Market, the Directorate General of Financing and Risk Management (DJPPR) last showed foreign investors gripping IDR1,001Trn of SBN, or 39.29% of the total circulating IDR2,547Trn based on data as of July 8.
The ownership rate is still positive IDR107.75Trn 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 bond market today is not in direct relation to the stock exchange. The exchange rate of rupiah in the forex market is up 0.35% and stagnant at IDR14,125/USD.