INDONESIABONDS.COM - Trading activities sharply increased in Indonesia’s short-dated sukuk in the days following an auction of the Islamic paper last week, raising hopes trading liquidity in the paper would soon improve sooner than expected, but will it last?
The finance ministry had often failed to sell sukuk in the past as investors demanded yields much higher than comparable conventional papers due to a lack of trading liquidity in the paper. The government expected to boost sukuk trading in the world’s most populous Muslim nation and widen its investor base including from the Middle East countries. (source)
Six-month sukuk bills SPNS03022012 were among the most actively traded in the days following a sukuk auction of five sukuk treasury bonds and bills by the finance ministry on Tuesday, August 2, 2011. Demand for the sukuk treasuries amounted to 9.59 trillion rupiah ($686.8 million), but the ministry only absorbed 810 billion rupiah.
The active trading in the Islamic paper came amid higher demand for short-dated conventional paper amid concerns over volatile financial markets and higher price pressure ahead of the major Muslim Ramadan and Eid al-Fitr celebrations later this month.
Trading was also active in the sukuk market after the government sold 3-year retail sukuk SR003 in May 2011.
However, trading in the Islamic debt was slow on Monday, as sales of Islamic bonds only consisted of three retail sukuk and one fixed-rate sukuk, with total trading value of 25.4 billion rupiah. Average daily trading volume was around 8 trillion rupiah in the government bond market. The highly sought goverment islamic bills in the auction last week were not seen traded on Monday.
There have been suggestions the government may have to offer higher yields to attract more demand for the Islamic paper and boost trading liquidity in the paper.
The following is a table and a chart describing monthly trading volume between December 2010-July 2011 in billions of rupiah.
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