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Bond Market Review

• August-2023: Preparing The Market As The Interest Rate Hike Cycle In Developing Countries Near Its End
  We still maintain our view on the domestic debt market. Still, with an additional note, the challenges ahead will be greater than in the previous few months. We expect the domestic market to maintain its positive performance in the next two months, supported by resilient domestic demand and lower supply. The inflation trend will remain within Bank Indonesia's target range, favorable due to its impact on future interest rate expectations and related monetary policy and, therefore, on pricing in the market. Supply will decrease, apart from approaching the end of the budget period, due to cuts in budget financing targets through debt securities. Meanwhile, domestic demand remains stable, with a solid increase in retail investors, which will strengthen strong domestic fundamentals. More detail ...
• 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 ...
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