FR0081 at Par in a Week. The 5-year benchmark SUN FR0081 is trading in a price range of 100.00-100.46 this week, based on Bloomberg data. Volatility in medium and long tenors, makes market participants interested in short tenures FR0081. A number of investors responded positively to the trend of low interest rates. On the other hand, BI is projected to still have room to continue monetary policy easing at the BI Board of Governors’ Meeting on Thursday (07/16) next week. Based on a Bloomberg survey, the BI 7-DRRR benchmark rate was again cut by 25 bps from 4.25% to 4.00% in the July period. In addition to a stable rupiah exchange rate, the BI 7-DRRR cut next week amid BI’s commitment to reducing SBN yields, as well as increasing liquidity through quantitative easing.

Government Increases ORI017 Quota. The high public interest has made the government increase the ORI017 issuance quota to IDR 17 trillion. DGT recorded ORI017 orders reaching IDR 18.33 trillion. This amount exceeds the quota set at the beginning of IDR 5 trillion. We see that interest in debt securities is the main choice of investors amid economic uncertainty. In addition, the trend of low interest rates made the ORI017 coupon of 6.4% attractive. Meanwhile, the ORI017 coupon is still greater than the bank deposit interest rates in BOOK III and BOOK IV categories. For the record, ORI017 can be traded after going through a holding period for two months, or past two coupon payment periods, namely after September 15, 2020. (Kontan, NHKSI Research)

SMF Issues IDR 2.1 Trillion Bonds. Sarana Multigriya Financial (Persero) or SMF issues Sustainable Bonds and Mudharabah Sukuk whose funds will be used to support the expansion of KPR distribution, where data as of 31 March 202 the amount reached IDR 4.14 trillion. SMF released the Phase IV Multigriya Financial IV Phase IV Sustainable Bonds in 2020 with a fixed interest rate of IDR 2.11 Trillion. The bonds consist of two series, namely Series A worth IDR 1.68 trillion with a coupon of 6.75% of the 370-day tenor; and Series B worth IDR 424 billion with a coupon of 8.10% 5-year tenor. The bonds are part of SMF V Sustainable Bonds with a total issuance of IDR 19 trillion. SMF also issues Phase I Sustainable Sukuk Mudharabah I Year 2020 in the amount of IDR 346 billion 370-day tenor, where the ratio is 92.28% with an indication of 6.75% profit per year. (CNBC Indonesia)

Retail Sales Still Declining. BI survey results recorded retail sales in May 2020 of 198.3 or a decrease of 20.6% YoY. This decrease is deeper than the April 2020 contraction of 16.9% YoY. The cause of the decline in sales in May, because most cities are still implementing the PSBB policy. The sales decline occurred in the other goods category, particularly the clothing sub-category which contracted 74.0% YoY or deeper than the April contraction of 70.9% YoY. On the other hand, easing PSBB and opening of shopping centers, will encourage retail sales growth. It is projected, the June retail sales index at the level of 199.9 or recorded a better decline, or only fell by 14.4% YoY. (Kontan)

Government Increases SUN Supply to IDR 15 Trillion. Minister of Finance said that from July to December 2020, the Ministry of Finance will increase the target of SUN issuance. This is stated in Government Regulation in Lieu of Law (Perpu) No. 1/2020 that allows BI to buy SUN through the primary market. The burden sharing policy between BI and the Ministry of Finance will encourage liquidity in the SUN market. In addition to FR0081, investors can start watching FR0082, FR0080, and FR0082 ahead of the SUN auction next Tuesday.

-REVIEW (July 9, 2020)-
FR0081 (5yr): -1.3 Bps to 100.46 (6.38%)
FR0082 (10yr): -2.8 Bps to 99.48 (7.06%)
FR0080 (15yr): -1.3 Bps to 99.55 (7.54%)
FR0083 (20yr): -2.5 Bps to 99.20 (7.57%)

UST 2yr: -0.008 point to 0.15%
UST 5yr: -0.017 point to 0.28%
UST 10yr: -0.051 point to 0.61%
UST 30yr: -0.087 point to 1.31%
German Bund 10yr: -0.023 point to -0.46%
UK Gilt 10yr: -0.024 point to 0.15%

CDS 2yr: +1.61% to 51.17
CDS 5yr: +0.13% to 123.06
CDS 10yr: +1.21% to 193.30

WTI: -3.12% to USD39.62/Barrel
BRENT: -2.17% to USD42.35/Barrel