FR0086 at Par, closed at the price level of 100 or yield of 5.49% at the close of Monday (24/08) based on Bloomberg data. Investors are interested in these short tenors because they are more liquid, and not because the yields are higher like those offered in long tenors. The strengthening of the 6-year tenor SUN ahead of the SUN auction, again offers candidates for the FR0086 and FR0087 benchmarks. The government also offers other old series such as FR0080, FR0083, and FR0076, as well as short tenor SUN SPN03201126 and SPN12210603. In the previous auction, FR0086 (6-year) posted an incoming bid of up to IDR 42.9 trillion, or representing more than 40% of the auction entry bid for Government Securities (SUN) worth a total of IDR 106 trillion on 11 August 2020. The total bid entered for the SUN auction on Tuesday was oversubscribed by up to 5.3x from the indicative target set by the government of IDR 20 trillion. Investors are interested in the new FR0086 series because it offers a weighted average yield of up to 5.82%, or 30 bps higher than the coupon offered by this series at the 5.50% level.

PPA Issues IDR 642.1 Billion Bonds. Perusahaan Pengelola Aset (PPA) plans to issue bonds worth IDR 642.1 billion in three series. The three series are: Series A worth IDR 100 billion with a 3-year tenor with a 9.95% coupon; Series B worth IDR 345 billion with 5-year tenor coupon 10.55%; and Series C worth IDR 197 billion with a 7-year tenor with a coupon of 11%. Meanwhile, the public offering period will be held on 24-27 August 2020 and listing on the Indonesia Stock Exchange on 2 September 2020. Currently, PPA is expanding the scope of new tasks, namely restructuring and revitalizing BUMN. Another task is for investment activities and management of BUMN assets.

Pen budget absorption is 25%. The government says that the actual use of the budget in the PEN program has reached IDR 173.98 trillion or around 25% of the total value of IDR 695.2 trillion. This figure is an increase compared to 1H20 which was valued at IDR 124.6 trillion. Meanwhile, per August it increased to IDR 173.98 trillion or up 18%. Economic growth in 2Q20 contracted by 5.32%. To increase the rate of the economy in a positive direction, this budget absorption must be accelerated, be it the Ministry / Institution program or the PEN program run by a number of ministries. Several programs that will continue to be encouraged are mainly related to direct cash assistance (BLT), as well as productive assistance or salary subsidies for workers with salaries below IDR 5 million.

Observing SUN Auction Results. Investors are again watching the offers for FR0086 and FR0087 amidst the trend of low interest rates. The short tenor liquidity factor is important, amidst the current volatility of the bond market. On the other hand, investors can also look at the long tenors FR0083 and FR0076 which are currently in demand by foreign investors. A number of market players are interested in long tenors because they offer high yields amid the current low interest rate trend. Yesterday, the rupiah exchange rate closed up 0.69% to IDR 14,671 / USD on the spot market. Meanwhile, BI’s middle rate edged down 0.05% to IDR 14,794 / USD. The movement of the rupiah is still driven by positive sentiment from Indonesia’s trade balance surplus, giving expectations of a stable rupiah exchange rate.

-REVIEW (Aug. 24, 2020)-
FR0081 (5yr): -7.9 Bps to 103.89 (5.56%)
FR0082 (10yr): -0.7 Bps to 102.32 (6.67%)
FR0080 (15yr): +1.5 Bps to 102.54 (7.21%)
FR0083 (20yr): +0.7 Bps to 101.98 (7.30%)

FR0086 (6yr): -3.8 Bps to 100.00 (5.49%)
FR0087 (11yr): -3.5 Bps to 99.96 (6.50%)

UST 2yr: +0.009 point to 0.15%
UST 5yr: +0.018 point to 0.28%
UST 10yr: +0.025 point to 0.65%
UST 30yr: +0.015 point to 1.35%
German Bund 10yr: +0.017 point to -0.49%
UK Gilt 10yr: +0.007 point to 0.21%

CDS 2yr: -3.72% to 37.17
CDS 5yr: +1.62% to 103.60
CDS 10yr: +2.25% to 173.22

WTI: -0.67% to USD42.82/Barrel
BRENT: -1.03% to USD44.90/Barrel
Source: Bloomberg