Biden’s victory hit SUN yield, the lowest since 2017. Joseph Biden finally came out as the winner defeating incumbent Donald Trump, in the presidential election (pilpres) of the United States (US). Biden got 290 electoral college votes to 214 for Trump, or needs 270 votes to win the presidential election. Foreign investors, as the second largest shareholder in Government Securities (SBN), feel comfortable with Biden’s policy. Market participants project that there will be no more trade wars between the US and a number of countries, especially China, as well as the intervention of the Fed. This development has made foreigners hunt for assets in developing countries, especially SBN, getting bigger. Based on data from the Directorate General of Financing and Risk Management (DJPPR), foreign ownership in SBN was recorded at IDR 951.35 trillion or an increase of IDR 15.53 trillion from the previous month. At the end of the week, the yield on the benchmark 10-year Government Bond (SUN) FR0082 fell 16 bps to a level of 6.27% or even, the yield on FR0087 fell to 29 bps. For the record, the lowest yield on 10-year government securities since 2017 is at 6.31% level.

MNC Investama Converts IDR 3 Trillion Bonds to Shares. MNC Investama Tbk (BHIT) investment company has verified the issuance of senior bonds worth USD 231 million or around IDR 3 trillion. The bondholders have approved the offer to convert bonds to shares, which will reduce the remaining debt of the company and ease the financial burden. Meanwhile, new bonds with a low coupon rate will drastically reduce the financial burden to be borne by the company. Bondholders have two options. First, exchanging bonds with the company’s new shares at an exchange rate of 8,267,052 shares per USD 100,000 of the principal amount of the bonds. This is equivalent to a conversion price of IDR 173 per share using an exchange rate of USD 14,302. Second, new bonds issued by the company with an exchange rate of USD 100 thousand, the principal amount of new bonds for every USD 100 thousand principal amount of bonds. As for the new bonds, he said, offering a fixed coupon of 1% per year. (Investor Daily)

Foreign Debt Payments Press Cadev. After being eroded by USD 1.8 billion in September 2020, October 2020 foreign exchange reserves (Cadev) fell again. Bank Indonesia (BI) said that the position of cadev in October 2020 was USD 133.7 billion, or decreased by USD 1.5 billion from the position at the end of September 2020 which was USD 135.2 billion. This decline was influenced, among others, by the payment of government external debt. The position of foreign exchange reserves is equivalent to financing 9.7 months of imports or 9.3 months of imports and servicing of government external debt, and is above the international adequacy standard of around 3 months of imports. (Kontan)

Investors will Still Respond Positively to Biden’s Victory. Biden’s victory will bring foreign funds back into Indonesia, especially the bond market. Indeed, the rupiah was also overshadowed by a decrease in foreign exchange reserves, but this was anticipated by market players. At the end of the week, the rupiah strengthened 1.18% to IDR 14,210 / USD. Meanwhile, BI’s middle rate strengthened 0.82% to IDR 14,321 / USD. BI released Indonesian cadev data for the period of October 2020 valued at USD 133.7 billion. This position is down by USD 1.5 billion compared to the end of September. Meanwhile, the cause of the decline in 2 consecutive months was the same, namely the payment of foreign debt. In the short term, investors can watch FR0082, FR0080, and FR0087.

-REVIEW (Nov. 6, 2020)-
FR0081 (5yr): -7.6 Bps to 104.46 (5.38%)
FR0082 (10yr): -15.9 Bps to 105.27 (6.27%)
FR0080 (15yr): -15.2 Bps to 105.87 (6.85%)
FR0083 (20yr): -7.0 Bps to 103.45 (7.16%)

FR0086 (6yr): -7.5 Bps to 100.47 (5.39%)
FR0087 (11yr): -29.0 Bps to 101.37 (6.31%)

UST 2yr: +0.008 point to 0.15%
UST 5yr: +0.035 point to 0.36%
UST 10yr: +0.056 point to 0.82%
UST 30yr: +0.077 point to 1.60%
German Bund 10yr: +0.017 point to -0.62%
UK Gilt 10yr: +0.041 point to 0.27%

CDS 2yr: -6.35% to 32.91
CDS 5yr: -2.49% to 84.44
CDS 10yr: +1.75% to 150.25

WTI: -4.25% to USD37.14/Barrel
BRENT: -3.61% to USD39.45/Barrel
Source: Bloomberg