The results of the Bank Indonesia (BI) Board of Governors (RDG) Meeting will be announced today. Market expectations are that BI will lower the BI 7 Days Reverse Repo Rate (BI 7-DRRR) by 25 bps to 3.50%. If this is true, it will be the first cut since November 2020. The cut in interest rates has been accompanied by a decline in yield. This will also cause the yield spread between Government Securities (SUN) and government bonds in other countries to narrow. The pressure on the SUN market yesterday was also amidst the weakening of the Composite Stock Price Index (IHSG) and the decline in US Treasury (UST) yields. The yield on 10-year government bonds stood at 6.37% and UST for the same tenor was at 1.28%.
Corporate Bonds have the Potential to Give Return 8%. Hoping for a more positive economic recovery this year, corporate bonds are predicted to be able to provide returns of up to 8% in 2021. The condition is that investors still have to pay attention to several main factors before hunting down corporate bonds. Quoting the Indonesia Stock Exchange (IDX) website, at the close of trading on Wednesday (17/2) the total return for the INDOBeXC-TR corporate bond index was at the level of 336.27, while the total return for the government bond index was at the level of 306.9. The trend of low interest rates also dragged down the yield on government bonds or government bonds (SBN). In addition, BI’s benchmark interest rate is currently encouraging market players to seek alternative investment instruments with higher yields. In addition, the economic recovery is an excuse for corporations to start expanding and dare to offer bonds with higher yields. (Kontan)
Government Optimistic that Economy 2021 will grow by 5%. Despite revising the economic growth projection this year from 4.5% – 5.5% to 4.5% – 5.3%, the government remains optimistic that Indonesia’s economy will grow 5% in 2021. State Budget (APBN) assumptions. With the handling of Covid and the momentum of recovery, the projected economic growth this year is in the range of 4.5% to 5.3%, but the point of estimate remains at 5%. The government together with BI and the Financial Services Authority (OJK) will continue to accelerate economic growth amid the ongoing Covid-19 pandemic. There is a new factor that will become a game changer for economic recovery in the country, namely the vaccination program. (Investor Daily)
Cut BI 7-DRRR Supports Strengthening of Government Securities. Expectations of BI to cut BI 7-DRRR by 25 bps are likely to withstand pressure from the SUN market. On the other hand, market players are also still monitoring the effectiveness of the corona virus vaccine, which makes them tend to be more careful in trading this week. Domestic investors mainly come from the banking sector which still has a high level of liquidity and is looking for optimal investment instruments. Investors can again look at FR0086, FR0087, and FR0083.