Increasingly uncertain global financial market has led a massive drop in govvies yield at the last week trading. Surging govvies yield is expected to put pressure on corporate bonds sales as investor would demand relatively high coupon rate to compensate for greater risks. Higher coupon rates were observed in the last two weeks trading days. Bank UOB, Bank BRI and Protelindo have all priced their bonds closer to the upper range of the guidance. Yet, bids received for Protelindo and Bank BRI were below target. Bank BRI was reportedly receiving only IDR4.6trn for its Shelf Registration Bonds II Phase I, significantly lower than its IDR7 trn target. Likewise, Protelindo also has lowered its issuance size to IDR800bn from initial target of IDR1.5trn.
Elsewhere, Hutama Karya (HK), a wholly state owned construction company, has started the book building of IDR1trn of 10y bond which the price was guided at risk premium of 30-75bps over 10y benchmark FR0056. This HK’s bond program is the first corporate bond guaranteed by the government as stipulated by PMK No 168/PMK.08/2016. Prior to this PMK release, the MoF also has issued PMK No 253/ 2015 to provide a guarantee on the debt raised by HK to finance Trans Sumatera construction. Under the government guarantee facility, Pefindo assigned idAAA(gg) (Triple A; Government Guarantee) rating for the bond, which is higher than the HK’s corporate rating of idA-.