Uncertainty After The Presidential Election Begins To Decrease, Bond Market Is Predicted To Be More Attractive

JAKARTA - The bond market is predicted to attract more after the Board of Governors' Meeting (RDG) of Bank Indonesia (BI) decided to keep the BI-Rate at 6 percent on Wednesday, February 21, 2024. In 2024, it is believed that it will be the year when there will be a decrease in interest rates which is predicted to start in July.

PT Bahana TCW Investment Management (Bana TCW) believes that BI will cut interest rates at least after the Fed is expected to start its rate cut program in July. This is based on the Fed's latest projection which states that it will reduce interest rate/FFR (Fed Fund Rate) three times throughout 2024, less than the market projection which had reached six to seven times the interest rate decline in 2024.

Senior Economist Bahana TCW, Emil Muhamad said the projected reduction in interest rates was an additional positive sentiment from domestic to bonds in 2024. In addition, the uncertainty or uncertainty related to the Presidential Election has begun to decrease, because the market appreciates the implementation of the presidential election which is running conducive and has the potential for one round.

"We believe that 2024 will be the year of lowering interest rates which will have an impact on increased attractiveness and potential increase in the bond market. Although this will still not be seen in the first quarter of 2024, because the Fed is expected to start cutting its interest rates in July. We project that BI will also make adjustments by lowering interest rates later," Emil said, in his statement, Tuesday, February 27.

The potential bond is also driven by positive sentiment from within the country, although the global economy is still overshadowed by uncertainty. From within the country, Indonesia experienced a trade surplus for 45 consecutive months which is the longest record after reform.

In addition, during the first quarter of 2024, various government and public spending will be driven by the disbursement of social protection funds, the increase in the salaries of the State Civil Apparatus (ASN), and the increase in UMR.

From a private perspective, Emil added, the positive response of business actors to the shorter implementation of the Presidential Election will encourage business people to calculate funding needs for their business, this has the potential to increase the number of corporate bond issuances. The number of corporate bond issuances in 2024 is predicted to increase compared to 2023.

Referring to data from the Indonesia Stock Exchange (IDX) for corporate and sukuk bond emissions recorded throughout 2023 as many as 107 emissions from 57 companies with a value of IDR 117.80 trillion. Meanwhile, the government issued Government Securities or Retail SBN throughout 2023 amounting to IDR 147.42 trillion. This achievement was obtained through the issuance of seven retail SBN series offered by the government, namely SBR012, SR018, ST010, ORI023, SR019, ORI024, and ST011.