SIMINVEST – Fixed Income Monthly Report – April 2024

In April 2024, significant shifts were observed in both the US Treasury Yield and Indonesia’s economic landscape. Firstly, the 10 Year US Treasury Yield surged notably, climbing from 4.20% to 4.68%, propelled by persistent inflation pressures and increased monthly net issuances. This trajectory indicated expectations of prolonged higher interest rates, prompting investors to anticipate a delay in the first-rate cut until later in the third quarter of 2024, signaling a significant market sentiment shift. Meanwhile, Indonesia’s inflation rate moderated slightly to 3.00% year-over-year, falling below both the previous month’s figure of 3.05% and the consensus expectation of 3.10%. However, core inflation surpassed projections, expanding to 1.82% year-over-year, driven by volatile food prices. Looking ahead, potential inflationary risks include geopolitical tensions impacting gasoline prices and the ongoing depreciation of the Rupiah, which lead BI hike BI-rate 25 bps in April Meeting. Moreover, in the realm of Indonesian finance, sukuk issuance experienced a notable decline in April 2024, totaling IDR0.6 trillion, a 57.1% decrease compared to the previous year. Despite this decline, the Pulp & Paper sector emerged as the market leader, accounting for 41% of total issuance, followed by the Financial Institution sector at 26% and Energy at 21%. Conversely, the corporate bond market in Indonesia witnessed a remarkable surge during the same period, with issuance reaching IDR 11.9 trillion, marking a significant 17.2% increase compared to the previous month. This surge adequately covered corporate bond maturities, totaling IDR 10.1 trillion, highlighting robust market dynamics within the corporate bond sector.

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