The focus of funding sources on medium and long tenors prevented the government from winning at all the short tenors at the Sukuk auction yesterday. The highest yield expectations were PBS027 and PBS017, up to 5.29% and 6.00%, respectively, or 70 bps and 60 bps higher than the weighted average yields of the previous Sukuk auction. Efforts to reduce the cost of funds prompted the government to again offer an additional auction (green shoe option) of Sukuk on Wednesday (24/02). The government again offered PBS029, PBS004 and PBS028 today, with weighted average yields at 6.60%, 6.52%, and 7.12%, respectively. For the record, the nominal value of the Sukuk won in the auction is only worth less than IDR 5 trillion, or is below the indicative target of IDR 12 trillion. In the auction process, the bid entered again fell to a value of IDR 24.2 trillion. This value is lower than the previous Sukuk auction of IDR 26.1 trillion.

PNM and Pupuk Indonesia Will Immediately Offer IDR 3.4 Trillion Bonds. Permodalan Nasional Madani (PNM) and Pupuk Indonesia (Persero) plan to issue bonds amounting to IDR 3.41 trillion. PNM plans to issue Sustainable Bonds III Phase V in 2021 amounting to IDR 666.2 billion. This bond is part of the PNM Sustainable Bond III with a target fund of IDR 6 trillion. The bonds were issued in three series, namely: Series A worth IDR 168 billion, with an interest rate of 6.25% and a tenor of 370 days. Meanwhile, Series B is IDR 159 billion, with an interest rate of 7.25% and a 3-year tenor. Meanwhile, Series C is IDR 339.2 billion, with an interest rate of 8.25% and a 5-year tenor. Apart from PNM, Pupuk Indonesia (Persero) will conduct a Phase II Sustainable Public Offering (PUB) worth IDR 2.75 trillion which will be implemented in March 2021. This bond consists of three series, namely Series A worth IDR 350 billion, with an interest rate of 5, 6% and 3-year tenor. Then, Series B IDR 1.6 trillion, an interest rate of 6.2% and a 5-year tenor. Furthermore, Series C is IDR 800 billion, with an interest rate of 7.2% and a 7-year tenor. Fitch Ratings has assigned an AAA rating for the issuance of Pupuk Indonesia bonds. This bond is part of the Continuous Bond II which has a total ceiling of up to IDR 8 trillion. (Investor Daily)

The 2021 PEN Budget Ceiling Returns Up. The Ministry of Finance (Kemenkeu) has set a budget ceiling for the 2021 national economic recovery program (PEN) of IDR 699.43 trillion. In almost two weeks, the PEN budget ceiling increased by 11.38% from the ceiling as of 9 February 2021 which amounted to IDR 627.96 trillion. The budget also increased by IDR 295.4 trillion from the PEN ceiling that was first announced by the government in early 2021, namely IDR 403.9 trillion. This figure is also up 20.63% from last year’s PEN budget realization of IDR 579.8 trillion. The increase in the PEN budget is a step to encourage the effectiveness of the national economic recovery, which is expected to accelerate the disbursement of the PEN program in 1Q20. (Kontan)

Selective Buying Amidst UST Yield Increase. Some market players began to soften and respond to sentiment on the cut in the BI 7-DRRR rate. On the other hand, investors are keeping a close watch on the Fed’s speech regarding the benchmark interest rate and inflation. The Fed’s testimony is interesting, because it occurred in the midst of an increase in UST yield to its highest level in the last 1 year. Yesterday, the price of Government Securities (SUN) closed mixed, with FR0086 and FR0088 still trading at a discounted price. Meanwhile, FR0087 had touched par level, amidst the focus of investors on the development of the pandemic and the recovery of the world economy. In the short term, investors can look back at the FR0086, FR0087, and FR0088.