Banking Sector Encourages SUN Auction Bidding. Based on DJPPR data, the total bid entered into SUN auction Tuesday (07/28) reached IDR 72.8 trillion. Meanwhile, the nominal won was IDR 22 trillion. This offer figure, increased from the previous auction which was valued at IDR 61.2 trillion. NHKSI Research sees, in addition to the potential return of foreign investors, the banking sector is still a hope in the domestic bond market. For the record, banking ownership in SBN has relatively increased since the end of last year. The declining level of bank LDR ratio, and the increasing third party fund liquidity, makes banks need alternative investment instruments. In addition, foreign investor liquidity has also increased, in line with the main central banks in the world are channeling stimulus in the form of quantitative easing. Positive sentiment on the SUN auction was also amidst certainty from Bank Indonesia, which became the stand by buyer.

Garuda Negotiates with EBA Holders. Garuda Indonesia Tbk (GIAA) negotiates with Mandiri GIAA01 Asset Backed Securities (EBA) holders regarding the remaining EBA payments for the July 2020 period. The Company remains committed to meeting payment obligations amid liquidity pressures due to the Covid-19 pandemic. As is known, the Collective Investment Contract (KIK) EBA Mandiri GIAA01 is a securities right to the revenue of ticket sales of Jeddah and Madinah flight routes worth Rp 2 trillion with a five-year tenor. The Company issued EBA on June 22, 2018. In detail, the securities consisted of class A EBA worth Rp 1.8 trillion and class B EBA totaling Rp 200 billion. In the EBA agreement it is stated that the principal payment of EBA class A reaches Rp 360 billion per year with a fixed investment return of 9.75% per year.

The Government Expands the 2021 State Budget Deficit to 5.2%. The Government will widen the deficit in the 2021 State Budget (RAPBN) to 5.2% of the Gross Domestic Product (GDP). Previously in the Macroeconomic Framework and Fiscal Policy Principles of 2021 (KEM PPKF 2021) the government targeted a budget deficit in the range of 3.21% to 4.17%. With a deficit of 5.2% of GDP in 2021, the Indonesian government will have a spending reserve of IDR 179 trillion used for priority spending in order to support national economic recovery. Uncertainty occurs due to a number of factors, first the speed and possibility of handling Covid throughout the world. Second, namely the extent to which the global economic recovery is also still facing uncertainty because of Covid. Third, namely the recovery of the domestic economy which also depends on efforts to deal with Covid-19. If Covid’s handlers are effective and in line with economic recovery efforts, the domestic economy can recover in the third quarter. With the hope that economic growth in the third quarter could reach 0.4% and in the IV quarter it will accelerate to 3%.

Investors Eyed on Long Tenor. Foreign investors who have begun to dare to re-invest in Indonesian debt securities, and the government’s commitment to maintain momentum, have become a positive sentiment in the Indonesian bond market. Market participants can re-examine long tenures, continuing investor interest in Tuesday’s SUN auction. Many SUN auction participants are interested in long tenors because of market expectations of bond prices. For the record, FR0082 recorded incoming offers reaching IDR 21.4 trillion, with an amount won of IDR 4.8 trillion. Investors are also interested in the short tenure of FR0081, which recorded a bid of IDR 17.5 trillion, with a nominal won of IDR 7.2 trillion. NHKSI Research sees that the trend of low interest rates will make long-term SUN more attractive. Investors can watch FR0082, FR0080, and FR0083 in today’s trading.