Weekly Report | Mar 26, 2019

Foreign Outflows from SUN

Last week’s foreign inflows of nearly IDR14 trillion caused sovereign bonds (SUN) strengthened. Bank Indonesia (BI) stance of retaining 7DRR unchanged constituted as positive sentiment. BI’s commitment to maintaining an accommodative macroprudential policy by increasing the threshold range of macroprudential intermediation ratio (RIM) from 80%-82% to 84%-90% was another positive sentiment. The policy aims to support more banking loans, distributed to business sectors. On the other side, the Fed’s dovish statement also supported SUN’s robust movement.

SBSN Auction

At the auction of sharia sovereign bonds (SBSN) dated 03/19/2019, the Indonesian government secured funds of IDR8.98 trillion of the total incoming bid worth IDR29.69 trillion. The amount absorbed topped the indicative target of IDR8 trillion. SBNS with 2- year tenor, PBS014, secured the most substantial amount of IDR13.9 trillion.

Review of USDIDR

Last week, USDIDR strengthened at 0.68% to 14,163. The main catalyst for the rupiah appreciation was the outcome of FOMC meeting and Jerome Powell’s dovish language. The Fed signaled no rate hikes appropriate for 2019. The signal was much dovish than the prelude: possible 2 hikes in 2019. Like the Fed’s dovish stance, BI also left 7DRR unchanged at 6%. Rupiah was depreciated on weekdays as the U.S. Treasury yields reversed. Yields of U.S. Treasury with 3-month tenor outpaced yields of U.S. Treasury with 10-year tenor.