Foreign Investors Calculate Fair Yield. Based on DJPPR data, foreign ownership in SBN decreased by IDR 4.6 trillion to IDR 935.8 trillion on Wednesday (07/01). The ownership decreased from the position Monday (06/29) IDR 940.4 trillion, after recording an increase in ownership of IDR 8.6 trillion since the end of May 2020. Foreign investors as the largest portion of SBN ownership, are recalculating the normal yield of Indonesian domestic SBN. Foreigners are aware of the impact of widening budget deficits on the economy. On the other hand, the Indonesian government is again aggressively offering debt securities, creating an abundant supply of debt securities and increasing the bond market volatility. Meanwhile, it is projected that foreign investors will not be aggressive and tend to consolidate.

Modernland Realty Postpones IDR 150 Billion Bonds. The matured bonds are Series 1 Modernland Realty Continuous Bonds I in Series B. These bonds have a 5-year tenor with a coupon rate of 12.5% per year. Previously, a number of rating agencies cut Modernland Realty’s debt rating and were aware of the risk of default. S&P Global Rating downgraded Modernland Realty’s credit rating from CCC to CCC- and embed CreditWatch with negative implications. The Indonesian Rating Agency (Pefindo) has also cut the 2015 Modernland Realty Phase I Series I Phase I Sustainable Bonds worth IDR 150 billion from idBBB- to idCCC. (Bisnis Indonesia)

Small and Medium Bank NPLs Rise. OJK recorded that in May 2020 the gross NPL position had touched 3.01%. This figure is up from the beginning of the year which was still at 2.76%. The highest NPL was in the Commercial Bank Business Activities (BUKU) II group, which was 4.04%. As for NPL BUKU I increased to reach 3.9% as of May 2020. NPL BUKU I increased from the realization of January 2020 which amounted to 2.95%. While BUKU II increased from the position of January 2020 at the level of 3.89%. This increase in NPL was unavoidable, as credit risk increased due to the Covid-19 pandemic. This condition is also amidst the many incentives issued by the FSA, but the NPL continues to rise. (Kontan)

Government Offers PBS028 New Issuance, at the Sukuk auction on Tuesday (07/07) today. The 46-year PBS028 will complement other long-term Sukuk, such as the 43-year PBS005 and the 47-year PBS015. We project PBS028 to provide reward rates in the range of 8.15% – 8.20%. This figure uses the reference yields PBS005 and PBS015, which are at the level of 8.05% and 8.36%. Meanwhile, today’s Sukuk auction was supported by positive sentiment of 0.23% rupiah appreciation to the level of IDR 14,490 / USD on the spot market. The rupiah exchange rate strengthened at the BI exchange rate of 0.13% to the level of IDR 14,547 / USD. Previously, the rupiah was pressured due to the high demand for the US dollar in the dividend payment season. Meanwhile, external positive sentiment came from the rise in Chinese manufacturing index data.

-REVIEW (July 6, 2020)-
FR0081 (5yr): +1.3 Bps to 100.00 (6.49%)
FR0082 (10yr): +1.0 Bps to 98.54 (7.20%)
FR0080 (15yr): -0.7 Bps to 99.09 (7.60%)
FR0083 (20yr): -2.4 Bps to 98.74 (7.62%)

UST 2yr: +0.005 point to 0.15%
UST 5yr: +0.006 point to 0.30%
UST 10yr: +0.008 point to 0.67%
UST 30yr: +0.011 point to 1.44%
German Bund 10yr: +0.000 point to -0.43%
UK Gilt 10yr: +0.014 point to 0.20%

CDS 2yr: -6.07% to 49.15
CDS 5yr: -0.74% to 119.98
CDS 10yr: -0.05% to 187.34

WTI: -0.04% to USD40.63/Barrel
BRENT: +0.70% to USD43.10/Barrel