Daily Debt Research. Debt Research 3 April Debt Research 3 April 2014 GLOBAL MARKET WATCH

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1 Daily Debt Research Debt Research 3 April 2014 Debt Research 3 April 2014 IDR Yield Curve GLOBAL MARKET WATCH US Treasury prices slid Wednesday after a report showed privatesector payrolls added 191,000 new jobs last month, raising expectations about a forthcoming payrolls report. After the data, the 10-year note yield up 4.5 basis points on the day at 2.804%, hitting the top of its trading range from recent months. The benchmark yield marked its fourth consecutive day of rises, paring back a 25 basis point drop last quarter during its best performance since The 30-year bond yield also rose 4.5 basis points to 3.647%, and the 5-year note yield rose 5.5 basis points to 1.793%. Source: Bloomberg IDR Benchmark Series Series Price (ppt) Yield 5-yr FR yr FR yr FR yr FR Latest Data Country 10-yr yield Handy Yunianto handy.yunianto@mandirisek.co.id YTD United States Euro Zone Germany France Portugal Italy Greece Spain Emerging Asia Thailand Philippine Vietnam Indonesia Another economic data released Wednesday was orders for goods produced in U.S. factories that reported rose 1.6% in February. Orders for durable goods--products meant to last at least three years--rose 2.2% in February, while for nondurable goods increased 1%. The U.S. stock market ended a choppy session moderately higher on Wednesday, with the S&P 500 closing at a record. The S&P 500 index ended the day at a session high, up 5.38 points, or 0.3%, to 1,890.90, closing at a record for the eight time this year. Consumer discretionary and industrials sector stocks led the gains. The Dow closed up points, or 0.2%, at 16,573.00, only a few points shy of its record close reached Dec The blue-chip index is now flat for the year. Oil futures closed lower for a third session in a row on Wednesday, as May crude oil fell 12 cents, or 0.1%, to settle at $99.62 a barrel. While Gold for June delivery rose $10.80, or 0.8%, to settle at $1, an ounce, ending a losing streak that s spanned five sessions. DOMESTIC GOV T BOND MARKET Strong demand at the last bond auction although foreign participation declined As expected total bids coming to the auction was still solid at Rp26.2tn, although slightly lower than average bid in the last four auctions of Rp29.8tn. The highest bid was for the longest bond i.e. 20-yr FR68 totaling Rp7.15tn (vs. Rp6.4tn on previous auctions). The average/highest yield awarded for the 20-yr FR68 was 8.38/8.39%, lower than our range forecast of %, with total issuance of Rp3.7tn the highest among all series issued. The other FR series i.e. 5-yr FR69 and 10-yr FR70 drew bids of Rp7tn and Rp5.2tn respectively. The weighted average/highest yield awarded for the 5-yr FR69 was 7.6/7.64% -in line with our forecast of %. Meanwhile for the longer 10-yr FR70, the weighted average/highest yield awarded was 7.8/7.82% - slightly lower than our forecast of %. Page 1

2 The government issued Rp3tn and Rp1.7tn for 5-yr FR69 and 10-yr FR70 series. Meanwhile total bids for the SPN series reached Rp6.8tn (Rp4.3tn and Rp2.6tn for 3mo and 1-yr SPN) still lower than the average Rp8.2tn in the last six auctions. Weighted average /highest yield awarded for SPN3mo and 1-yr SPN were 6.22/6.35% and 6.36/6.4%, while our forecasts were % and % respectively. The Government issued Rp1tn and only Rp250bn for 9-mo and 1-yr SPN series Foreign participation in the last conventional bonds auction declined to Rp8.6tn or 32.7% of total bids (vs. 33.3% average in the last six auctions). However, absorption rate for foreign investors continued to increase to 46.7% from total issuances (vs. less than 36% average in the last six auctions). Demand from onshore investors continued to decline as the yields have fallen lately. Thus as of 2-Apr, the government has issued Rp173.8tn or almost 47% of the target for this year. It targeted to issue Rp66tn in 2Q (20% lower than Q1 issuance), thus it only needs to issue on average Rp8.6tn per conventional auction and Rp1tn for sukuk auction. Trading volume in the secondary market decreased to Rp9.7tn vs. Rp16.6tn on Tuesday. The 5-yr FR0069 led with Rp2.96tn or 30.4% of total trading volume for the day with closing price at 101 (-0.25%) yielding 7.63% (+6bp). FIGURE 1. FOREIGN DECLINED TO RP8.6TN OR 32.7% OF TOTAL BIDS (VS. 33.3% AVERAGE IN THE LAST SIX AUCTIONS Local Bid Foreign Bid % foreign participant 45.0% 40.0% 35.0% 30.0% 25.0% FIGURE 2. BUT ABSORPTION RATE FOR FOREIGN INVESTORS CONTINUED TO INCREASE (VS. LESS THAN 36% AVERAGE IN THE LAST SIX AUCTIONS) Local Accept Foreign Accept % foreign participant 70.0% 60.0% 50.0% 40.0% % % % 10.0% % 5 5.0% % - 7-Jan 21-Jan 5-Feb 18-Feb 4-M ar 18-M ar 2-Apr 0.0% - 7-Jan 21-Jan 5-Feb 18-Feb 4-M ar 18-M ar 2-Apr 0.0% TABLE 1. THE HIGHEST TOTAL BIDS ON THE LAST AUCTION COMING TO 20-YR FR68 Series Rp bn 7-Jan Jan-14 5-Feb Feb-14 4-Mar Mar-14 2-Apr-14 Average SPN 9,182 10,255 9,132 6,346 10,901 3,236 6,844 7,985 5-yr FR69 1,742 2,457 n.a 3,991 2,448 6,992 6,977 4, yr FR70 11,597 8,343 10,696 7,696 6,586 n.a 5,206 8, yr FR71 n.a 9,015 5,956 n.a 11,460 11,708 n.a 9, yr FR68 7,090 n.a 2,619 5,298 n.a 6,442 7,152 5, FR67 n.a n.a n.a n.a 7,729 n.a n.a 7,729 Total bids 29,611 30,070 28,403 23,331 39,124 28,378 26,179 Page 2

3 TABLE 2. THE GOVERNMENT HAS ISSUED RP173.8TN OR ALMOST 47% OF THE TARGET FOR THIS YEAR Target YTD Selisih dari target Budget deficit (% of GDP) (2.4) (1.7) Net Issuances Domestic bonds Global bonds Redemption & buybacks (98.5) (165.6) (56.1) Gross Issuances Domestic bonds Auction Conventional FR/VR dan T-bills/ZC Retail bonds (ORI & Sukuk) ORI Sukri Saving Bond Domestic sukuk Private placement Global bonds Yankee bonds Global sukuks Samurai bonds Euro denominated bond TABLE 3. GOVERNMENT BOND AUCTION RESULT Auction Date Series Maturity Lowest Bid Yield Highest Bid Yield WAY/WAP Highest Yield Awarded Target Total Bids (RP bn) Total Accepted 2-Apr-14 SPN Jul ,265 1,000 2-Apr-14 SPN Apr , Apr-14 FR Apr ,000 6,977 3,000 2-Apr-14 FR Mar ,206 1,700 2-Apr-14 FR Mar ,152 3,700 Source: DMO CORPORATE BOND MARKET On the corporate debt market, trading volume decreased to Rp469bn vs. Rp1.2tn on Tuesday. The 3.6-yr BNGA01BCN1 (Bank CIMB Niaga Shelf Registered Bond I phase I 2012 Series B / rated idaaa) led with Rp120bn or 25.6% of total trading volume for the day with closing price at yielding 9.5% resulting 205bp spread over the risk-free rate, it is considered fair compared with the average risk premium for AAA category bonds at 228 bps, based on our calculation. Page 3

4 TOP 10 MOST ACTIVE GOV T BONDS Bond ID ISIN Maturity TTM (yr) Volume Last Price YTM Coupon Prev Trans. FR0069 IDG Apr , Apr-14 FR0068 IDG Mar , Apr-14 FR0070 IDG Mar , Apr-14 FR0071 IDG Mar , Apr-14 FR0030 IDG May Apr-14 FR0058 IDG Jun Apr-14 FR0066 IDG May Apr-14 FR0042 IDG Jul Apr-14 FR0027 IDG Jun Apr-14 FR0064 IDG May Apr-14 Source : IDX TOP 10 MOST ACTIVE CORP BONDS Bond ID ISIN Rating Maturity TTM (yr) Volume Last Price YTM Spread Prev Trans. BNGA01BCN1 IDA B8 idaaa 30-Oct Apr-14 SSIA01B IDA B6 ida 6-Nov Mar-14 TUFI06D IDA D6 idaa 19-May Dec-13 ASDF01BCN1 IDA B6 idaa+ 21-Feb N.A 26-Mar-14 AISA01 IDA ida- 5-Apr Mar-14 PPLN01ACN2 IDA A8 idaaa 10-Dec Mar-14 AIRJ01C IDA C5 A(idn) 13-Mar N.A 25-Mar-14 ASDF02BCN2 IDA B8 idaa+ 26-Nov Apr-14 ADMF01BCN2 IDA B7 idaa+ 4-May N.A 1-Apr-14 FIFA01BCN1 IDA B0 idaa+ 20-Apr N.A 1-Apr-14 Source : IDX ECONOMIC DATA Key Reports Date Period Consensus Est. Actual Prior Revised ID: Inflation (YoY) 1-Apr-14 MAR ID: Inflation NSA (MoM) 1-Apr-14 MAR ID: Core Inflation (YoY) 1-Apr-14 MAR ID: Exports (YoY) 1-Apr-14 FEB ID: Imports (YoY) 1-Apr-14 FEB ID: Trade Balance (US$ bn) 1-Apr-14 FEB $300M $785M -$431M -$444M ID: BI Reference Rate 13-Mar-14 MAR Page 4

5 DEBT RESEARCH TEAM Handy Yunianto Aldian Taloputra Head of Fixed Income Research Economist Leo Putra Rinaldi Ali Hasanudin Economist Credit Analyst Yulia Ansari Wisnu Trihatmojo Credit Analyst Research Assistant DEBT CAPITAL MARKET TEAM Dennis Reshijaya Head of Institutional Sales R. Agung Koenoro Paul Hadi Institutional Sales Institutional Sales Sita Arvianti Teguh Suwarno Rahmadita Fitria Institutional Sales Institutional Sales Institutional Sales Indri Ratnasari Mohammad Haikal Ranny Rianovita Institutional Sales Institutional Sales Institutional Sales Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk Plaza Mandiri, 28 th Floor Jl. Jend. Gatot Subroto Kav Jakarta Indonesia General: Fax: (Debt Research) (Debt Capital Market) DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX). Although the contents of this document may represent the opinion of PT. Mandiri Sekuritas, deriving its judgement from materials and sources believed to be reliable, PT. Mandiri Sekuritas or any other company in the Mandiri Group cannot guarantee its accuracy and completeness. PT. Mandiri Sekuritas or any other company in the Mandiri Group may be involved in transactions contrary to any opinion herein to make markets, or have positions in the securities recommended herein. PT. Mandiri Sekuritas or any other company in the Mandiri Group may seek or will seek investment banking or other business relationships with the companies in this report. For further information please contact our number or fax ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her compensation. Page 5