FR0086 (New Issuance) Pushes Oversubscribed SUN Auction 5.3x. Prospective FR0086 (6-year) benchmark books incoming bids of up to IDR 42.9 trillion, or represents more than 40% of the bid for auction of Government Securities (SUN) worth a total of IDR 106 trillion. The total number of entrants to the SUN auction on Tuesday was oversubscribed by 5.3x from the indicative target set by the government of IDR 20 trillion. Investors are interested in the new series (new issuance) FR0086 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. NHKSI Research sees that the yield spread of up to 30 bps is attractive, amid the current low interest rate trend. On the other hand, the government is relatively selective in winning the FR0086, or only winning IDR 7.6 trillion (5.7x bid to cover ratio) from the bid to enter this series worth IDR 42.9 trillion. For the record, the total nominal value won in this auction is IDR 22 trillion or the same value compared to the previous SUN auction.

Medco Accelerates the Repayment of IDR 3 Trillion Bonds. Medco Energi Internasional Tbk (MEDC IJ) plans to accelerate the repayment of IDR 3 trillion rupiah-denominated bonds which will mature in 2020. Meanwhile, MEDC will use the proceeds from global bond issuance to accelerate bond repayments the rupiah. Meanwhile, the MEDC bonds that will be repaid are: First, Continuous Bonds II Phase VI 2017 Series A worth IDR 415 billion, with a coupon of 10.3% and maturing March 28, 2021; Second, the Continuous Bonds III Phase I Year 2018 Series A worth IDR 282.5 billion, with a coupon of 8.75% and maturing on March 29, 2021; Third, the Sustainable Bonds II Phase I Year 2016 Series B worth IDR 923 billion, with a coupon of 11.3% and maturing July 15, 2021; Fourth, Continuous Bonds III Phase II Year 2018 Series A worth IDR 1.15 trillion, with a 10% coupon and maturing September 28, 2021; and Fifth, Shelf Registration Bonds II Phase II Year 2016 Series B worth IDR 701 billion, with a coupon of 11.3% and maturing on September 30, 2021.

Indonesia Outlook is Stable with Declining CDS. Fitch maintains Indonesia’s sovereign credit rating at BBB level with a stable outlook. This determination will dampen the sentiment of Indonesia’s budget deficit that is widening due to the financing needs of the Indonesian government. On the other hand, Indonesia’s stable rating has a positive impact on Indonesia’s investment risk profile or CDS (credit default swap). Based on Bloomberg data, Indonesia’s 5-year CDS closed at 106.38 yesterday. This figure is decreasing compared to the highest level as of March 23, 2020, which reached the level of 293. This CDS decline indicates the lower level of risk of default on Indonesian debt securities. NHKSI Research sees that the government can take advantage of this positive sentiment to increase its ability to pay debts.

Pay attention to the new issuance FR0086 and FR0087. Investors can again look at the new SUN series FR0086 (6-year) and FR0087 (11-year) in today’s trading. Apart from the FR0086 which offers a spread yield of more than 30 bps, investors can also look at the FR0087 which also posted a yield spread of up to 25 bps in the yield on Tuesday (11/08) yesterday. The two short tenor series are actively traded and investors can take advantage of the momentum for short-term transactions. Meanwhile, investors can look at the stable long tenor FR0076 offering high yields, namely at the level of 7.42%. Yesterday, the rupiah exchange rate weakened 0.2% to IDR 14,680 / USD on the spot market. Meanwhile, BI’s middle rate strengthened 0.2% to IDR 14,728 / USD.

-REVIEW (Aug. 11, 2020)-
FR0081 (5yr): -4.1 Bps to 102.86 (5.80%)
FR0082 (10yr): -1.5 Bps to 101.75 (6.75%)
FR0080 (15yr): -4.8 Bps to 102.76 (7.19%)
FR0083 (20yr): -2.7 Bps to 101.49 (7.35%)

UST 2yr: +0.019 point to 0.15%
UST 5yr: +0.039 point to 0.27%
UST 10yr: +0.065 point to 0.64%
UST 30yr: +0.076 point to 1.33%
German Bund 10yr: +0.049 point to -0.47%
UK Gilt 10yr: +0.070 point to 0.19%

CDS 2yr: -3.31% to 43.29
CDS 5yr: -7.71% to 106.38
CDS 10yr: -2.60% to 168.85

WTI: -0.78% to USD41.61/Barrel
BRENT: -1.08% to USD44.50/Barrel
Source: Bloomberg