Indonesian Yields Find Support, Offshore Investors Off-Load Bonds

Indonesian USD sovereign debt yields rose 1-2bps on Wednesday, under-performing moves tighter by US treasuries. As we head into the Asia break INDON curves trade unchanged to 1bps tighter with curves slightly steeper. Recent weakness in Indonesian Sovereign debt has been largely driven by concerns that budget deficit will continue to widen over the next year, as the new President will look to spend on his policies including his free lunch program.

• The 2Y is 1bp lower at 4.77%, while the 10Y is -0.8bp lower at 5.018%, out-performing moves in the US treasury curve.
• The spread difference between USD Indon & US Treasury yields has been closing for the past few months with the 2Y now 25bps from a low of 73bps, while the 10Y is now 78bps vs yearly lows of 112bps.
• Indonesia sold IDR22.1 Trillion in 5-30yr Bonds, and IDR6.54 Trillion in 7-91D Bills the past week
• Cross market moves, the USD/IDR is 0.20% lower, the JCI is 0.10% lower while US Tsys are 0.5bp higher across the curve
• Foreign Investors have largely been better sellers of Indonesian bonds over the past 20-days as the average daily flow currently sit at -$40.3m, while the longer term 200-day average sits at $4.34m
• Looking Ahead: S&P Global Indonesia PMI Mfg & CPI is due on Friday