Mandiri Sekuritas DOMESTIC BOND MARKET

􀂄 Liquidity in the inter-bank money market was normal, indicated by the relatively low overnight JIBOR at 6.19. The rupiah grew to 9,013 (+15 points), moved toward its strongest point in 33 months after neighboring Singapore had raised its economic growth forecast, improving the outlook for regional trade. The dollar index (DXY)
weakened to 80.19 (-23bps). The spread between the yields of the domestic and Yankee bonds slightly narrowed to 4.33 (-3bps) means that investors expected the rupiah will appreciate against the US dollar.

􀂄 Overall, the government’s rupiah bond prices were still prolong its pace by 0.29%, with yield decreased to 8.61% (-8bps), with the 2-year fell the most by -15bps. Trading volume decreased to Rp6.5tn vs Rp10tn on the previous day. The most actively traded security was again the long-term 20-year FR52 totaling around Rp1.6tn— more than 25% of total trading. The FR52 was traded at 105.25 yielding 9.89% or down slightly from 9.91% on the previous day. Our fair yields for the bond is 9.80%, thus we think the FR52 is currently traded below its fair value, which then we recommend investors to buy this series.

Outlook: Trading wise we recommend investors take profit on the 17-yrs FR45 and the 10-yrs FR31 that are now trading at 97.95 and 116.2, yielding 10.05% and 8.64% respectively. Our fair prices for those bonds are 96.33 and 114.99, with fair yields
at 10.15% and 8.79%. Meanwhile, we assigned buy recommendation on the 16-yr FR37 and 17-yr FR42 with fair prices of 121.15 and105.68, yielding 9.44% and 9.57%