Banks are interested in PBS027. The banking sector is interested in the short tenor of PBS027, has a relatively good yield and is adjusted to bank liquidity. This 3-year tenor sukuk recorded incoming bids of up to IDR 15.8 trillion or more than 32% of the total incoming bids for this Sukuk auction of IDR 49.7 trillion. The total nominal value won by the government from the five series offered is IDR 9.5 trillion. This entry offer was the highest since March 10, 2020, in line with the prospect of Sukuk amid a downward trend in yields. In addition, a number of macro and micro stimuli provided by the government made a number of market players more optimistic. The Sukuk auction yesterday was also supported by positive sentiment from the 2Q20 current account deficit of only USD 2.9 billion. This figure is equivalent to 1.2% of GDP. Meanwhile, the trade balance data with a surplus of USD 3.3 billion was also relatively good compared to the previous period’s surplus of USD 1.2 billion.

Hermina Issues IDR 600 Billion Bonds. Medikaloka Hermina Tbk (HEAL IJ) will carry out the Hermina Phase I Continuous Public Offering (PUB) Year 2020 worth IDR 600 billion. The bond issuance plan is part of PUB Hermina with a total value of IDR 1 trillion. Meanwhile, 40% of the proceeds from the bond issuance will be used to increase hospital capacity; and 25% as working capital. The bonds will be issued in three series, namely: Series A, 3-year tenor; Series B 5-year tenor; and a 7-year Series C tenor. Meanwhile, this bond has received an idAA- rating from the Indonesian Securities Rating Agency (Pefindo).

Positive Trade Balance Press CAD. BI noted CAD for the 2Q20 period was worth USD 2.9 billion or the equivalent of 1.2% of GDP. The lower current account deficit stems from a surplus in the goods balance, in line with falling imports due to weakening domestic demand. In addition, the current account deficit narrowed due to reduced yield payments to foreign investors, in line with the contraction in economic growth in 2Q20. Meanwhile, the 2Q20 capital and financial account recorded a surplus of USD 10.5 billion. This figure is derived from net inflows of portfolio investment and direct investment. For the record, the capital account in 1Q20 was a deficit of USD 3 billion.

Rupiah depreciation ahead of the announcement of BI 7-DRRR. The results of the BI Board of Governors Meeting resolutions will drive the rupiah today. Yesterday, the rupiah closed down 0.34% at IDR 14,845 / USD on the spot market. Meanwhile, BI’s middle rate edged up 0.06% to IDR 14,907 / USD. The current condition, the trade balance which records a surplus of USD 3 billion, has the opportunity to make BI cut its benchmark interest rate again. Cutting interest rates will again depreciate the rupiah again. On the other hand, if BI maintains the BI 7-DRRR in August at 4%, it will make the rupiah strengthen. In the short term, investors can watch the short tenors FR0081 and FR0086, taking advantage of the sentiment of the benchmark interest rate.

-REVIEW (Aug. 18, 2020)-
FR0081 (5yr): -4.7 Bps to 103.25 (5.71%)
FR0082 (10yr): -3.7 Bps to 102.10 (6.70%)
FR0080 (15yr): -0.7 Bps to 102.56 (7.21%)
FR0083 (20yr): -0.2 Bps to 101.74 (7.33%)

FR0086 (6yr): -3.6 Bps to 99.30 (5.64%)
FR0087 (11yr): -0.0 Bps to 99.62 (6.55%)

UST 2yr: -0.008 point to 0.14%
UST 5yr: -0.011 point to 0.27%
UST 10yr: -0.019 point to 0.67%
UST 30yr: -0.038 point to 1.39%
German Bund 10yr: -0.011 point to -0.46%
UK Gilt 10yr: +0.003 point to 0.21%

CDS 2yr: -1.61% to 42.60
CDS 5yr: -2.17% to 103.06
CDS 10yr: -1.22% to 166.39

WTI: +0.00% to USD42.89/Barrel
BRENT: +0.19% to USD45.46/Barrel
Source: Bloomberg