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Tuesday, January 18, 2011

Moody's can not hold SUN correction

Irvin Avriano A.
Bisnis Indonesia

Moody's can not hold SUN correction

JAKARTA: Moody's upgrade on Indonesia's sovereign rating can not ease the selling pressure on government bond (SUN/surat utang negara) price in the secondary market.

Price index from Inter Dealer Market Association (IDMA/Himdasun) shows the pressure caused price declining and formed a lowest level since May 31th last year. The data showed the index turn down to 99.92 level from 100.8 level on last weekend. The 100.8 price already corrected from 102.9 level on the previous weeks, January 14th.

The same data also showed price occurs especially for long-tenured SUN, and the price declining will impacted on increasing yield due to movement that opposite on each other.

FR0030 and FR0050 10 years SUN series price corrected respectively by 25 basis point (bps) to 97.25% and 135 bps to 111.5%. The FR0055 series not only goes down, but also touch the lowest level.

FR0037 and FR0056 25 years SUN series price are also weakened to 204 bps to as low as 116.25% and by 700 bps to as low as 90%.

PT Bank International Indonesia Tbk Senior Economist, Samuel Ringoringo, said the upgraded rating by Moody's had anticipated by market participants and economists since last month.

"Indonesian bond market remained in negative mode. Yield curve steepened along with higher inflation expectation," said him in his research published today.

The reason comes from the pressures of inflation and adjustments to investment interest
bond markets also remained in negative mode. The condition predicted to remain due to global assets allocation following improving US economic outlook and tightening in Asia.

"Yield on the 10-year government securities have risen to the level of 8% from lows of 7%, "he said in published research.



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