Extension of the Jakarta PSBB, clouding expectations of a faster recovery for the domestic economy. This has made the 3Q20 national economy still shadowed by contraction. All SUN series saw yield increases, even for 30-year tenors, which saw yield decline. From the external side, the Fed’s decision to announce a new approach to inflation and the unemployment rate psychologically put additional pressure on the national bond market. The Fed agreed to take a new approach by targeting the inflation rate. This decision made the Fed keep inflation above 2% for the time being, offset by the price growth which was below the average inflation rate. For the record, high inflation is a negative sentiment that erodes investor yields.

Bank Tabungan Negara Releases Bonds. Two issuers have released bonds totaling IDR 2.5 trillion this week. The two issuers are Bank Tabungan Negara Tbk (BBTN IJ) which released Sustainable Bonds IV Phase I 2020 worth IDR 1.5 trillion and Chandra Asri Petrochemical Tbk (TPIA IJ) worth IDR 1 trillion. Based on data from the Indonesian Stock Exchange, at the beginning of the week, to be precise on Monday (24/8), the Bank BTN Phase I Sustainable Bond IV Year 2020 (Bond Phase I) issued by the State Savings Bank began to be listed on the IDX with a nominal value of IDR 1, 5 trillion. The rating result for the Bond Phase I is idAA + (Double A Plus) from Pefindo. Acting as Trustee in this issue are the Regional Development Banks of West Java and Banten. BBTN said that the funds from the bonds will later be used for credit financing sources, particularly housing expansion. These Phase I bonds are listed in three series, namely Series A worth IDR 577 billion with a tenor of 370 days; Series B IDR 727 billion with a tenor of 3 years; and Series C with IDR 196 billion tenor of 5 years. Another issuer that also issued bonds last week was Chandra Asri Petrochemical, to be precise, Thursday (27/8).

Indonesia Consumer Price Index. After experiencing a deflation of 0.10% MoM in July 2020, economists predict that in August 2020, the Consumer Price Index (CPI) will experience inflation. Inflation in August 2020 is projected to be 0.02% MoM. So that annual inflation will move at the level of 1.49% YoY. The relaxation of large-scale social restrictions (PSBB) and the realization of government assistance can increase household consumption, in other words, increase demand. Based on the survey, households with an expenditure of more than IDR 1 million per month began to increase to 86.19%. While in the previous month it was only 78.57%. The expenditure of the upper middle class also appears to have experienced a small increase. Moreover, spending by means of payments using electronic money and debit cards or credit cards. However, the increase in household expenditure was still not very significant. A number of commodities supported weak inflation in August 2020. Some commodities experienced a decline in prices (deflation), thus hampering the rate of inflation. For example, shallots decreased by 18.25% MoM, followed by a decrease in chicken meat by 10.99% MoM, sugar which decreased by 2.52% MoM, and rice which decreased in price by 0.20% MoM.

Investors Look At August’s Inflation Data. This data indicates that domestic demand is still weak, putting pressure on the 3Q20 economic growth outlook again, as the risk of contraction is getting higher. Previously in 2Q20, Indonesia’s economy contracted by 5.32% YoY. So that if the 3Q20 quarter contracted again, Indonesia would officially enter a recession zone. Investors are also watching that IHS Markit will announce data on manufacturing activity as reflected by the Purchasing Managers’ Index (PMI) for the August 2020 period. In July 2020, Indonesia’s manufacturing PMI score was at the level of 46.6. Trading Economics expects the August 2020 manufacturing PMI to rise to 47.3. A reading below 50 indicates that the domestic manufacturing PMI has not yet expanded. The rupiah exchange rate at the weekend strengthened 0.19% to IDR 14,632 / USD on the spot market. Meanwhile, BI’s middle rate also closed higher at 0.08% to IDR 14,702 / USD.


Bank Tabungan Negara Release Bonds

Indonesia Consumer Price Index

-REVIEW (Aug. 28, 2020)-
FR0081 (5yr): -0.1 Bps to 104.07 (5.51%)
FR0082 (10yr): +9.1 Bps to 100.94 (6.86%)
FR0080 (15yr): +6.3 Bps to 101.09 (7.37%)
FR0083 (20yr): +7.3 Bps to 100.73 (7.42%)

FR0086 (6yr): +9.0 Bps to 99.93 (5.51%)
FR0087 (11yr): +5.6 Bps to 98.86 (6.65%)

UST 2yr: -0.031 point to 0.12%
UST 5yr: -0.044 point to 0.27%
UST 10yr: -0.029 point to 0.72%
UST 30yr: -0.008 point to 1.50%
German Bund 10yr: -0.002 point to -0.41%
UK Gilt 10yr: -0.025 point to 0.31%

CDS 2yr: -0.46% to 36.64
CDS 5yr: +1.62% to 103.60 (as of Aug 20, 2020)
CDS 10yr: -0.50% to 163.45

WTI: -0.16% to USD42.97/Barrel
BRENT: +0.46% to USD45.81/Barrel
Source: Bloomberg