BI 7-DRRR Decision Price In, FR0086 Towards Par. Market players have anticipated BI’s decision to keep the benchmark interest rate at 4% level. Both SUN benchmarks and prospective benchmarks are not moving compactly, with the FR0086 price closing at the level of 99.83. Indonesia experienced deflation of 0.10% in July and deflation of 0.05% in August, as well as the risk of rupiah volatility, making BI maintain the BI 7-DRRR for the period of September. Meanwhile, FR0086 price is trending towards par, having touched its lowest level of 99.63 last Thursday. On the other hand, investors keep a close watch on foreign capital outflows, responding to the high rupiah hedging cost. This was followed by an increase in the supply of SBN as the budget deficit increased to 6.34%; and the discourse on the formation of a monetary council amid the independence of BI.

IDR 6.86 Trillion Bonds Due Next Month. A number of corporate bonds will mature in October worth IDR 6.86 trillion. There are 8 types of bonds that will mature next month, namely: ADMF04ACN6, with the name Sustainable Bonds IV Year 2019 Series A issued by Adira Dinamika Multi Finance Tbk worth IDR 299 billion. Furthermore, BTPN03BCN2, with the name Sustainable Bonds III Phase II Year 2017 Series B, issued by Bank BTPN Tbk worth IDR 900 billion. Pegadaian and Sarana Multigriya Finansial will also be due. Among them, with each code PPGD03BCN1 worth IDR 500 billion due on October 3, 2020 and code SMFP04BCN2 worth IDR 673 billion on October 13, 2020. Finally, Waskita Karya Tbk with each code WSKT01BCN1 worth IDR 1.15 trillion will maturity 16 October 2020 and WSKT03ACN1 worth IDR 1.369 trillion with maturity on 6 October 2020. Previously, the Indonesian Securities Rating Agency (Pefindo) noted, as of September 2020, 23 corporate bonds were due. The principal value of these bonds is IDR 5.44 trillion. (CNBC Indonesia)

BI’s Burden Sharing worth IDR 99 Trillion. Until September 15, 2020, BI has bought IDR 99.08 trillion government SBN directly. This is the burden of sharing public goods financing in accordance with the SKB between the Minister of Finance and the Governor of BI dated 7 July 2020. In addition, BI has also realized the burden sharing with the government for non-public goods funding, especially for the recovery of MSMEs amounting to IDR 44.38 trillion. Furthermore, BI has also purchased SBN on the primary market through a market mechanism in accordance with SKB I dated April 16, 2020, amounting to IDR 48.03 trillion. BI emphasized, this burden sharing scheme will only take place this year. On the other hand, BI does not rule out that the SBN purchase mechanism in the primary market based on the SKB I dated April 16, 2020, in which BI can enter the primary market, will continue next year. With a note, BI is a standby buyer or non-competitive bidder. (Kontan)

Investors are Looking for Long-Tenor SBNs. BI 7-DRRR remains amid growing recession risks, making market players look for safer assets and offering fixed returns, such as long-term government bonds. Investors can look at the FR0086 and FR0087, as well as the long tenors of FR0080 and FR0083. Rupiah closed higher again, 0.07% to IDR 14,833 / USD on the spot market. Meanwhile, BI’s middle rate weakened 0.23% to IDR 14,878 / USD. The movement of the rupiah will still be influenced by pressure from the US dollar, in line with the stagnant US economic growth. The US employment data was stagnant this week, due to the stagnant retail sales for the August period. Domestically, the rupiah exchange rate is supported by a trade balance surplus.

-REVIEW (Sept. 17, 2020)-
FR0081 (5yr): +1.4 Bps to 103.89 (5.55%)
FR0082 (10yr): +0.5 Bps to 100.72 (6.89%)
FR0080 (15yr): +1.1 Bps to 100.74 (7.41%)
FR0083 (20yr): +0.7 Bps to 100.58 (7.44%)

FR0086 (6yr): +0.6 Bps to 99.83 (5.53%)
FR0087 (11yr): -0.6 Bps to 97.70 (6.81%)

UST 2yr: -0.002 point to 0.13%
UST 5yr: -0.005 point to 0.27%
UST 10yr: -0.009 point to 0.69%
UST 30yr: -0.020 point to 1.44%
German Bund 10yr: -0.007 point to -0.49%
UK Gilt 10yr: -0.026 point to 0.18%

CDS 2yr: +3.42% to 34.84
CDS 5yr: -0.23% to 90.65
CDS 10yr: -0.77% to 156.57

WTI: +4.91% to USD40.16/Barrel
BRENT: +4.16% to USD42.22/Barrel
Source: Bloomberg