Green Shoe Option, government aggressively won PBS028. Weighted Average Yield (WAY, Weighted Average Yield) PBS028 which was 4 bps lower than the previous auction. This made the government win all of the PBS028 bids in the Green Shoe Option sukuk auction yesterday worth IDR 3.61 trillion (1x bid to cover ratio). The government offered WAY PBS028 at the level of 7.49% yesterday, compared to the mid-September sukuk auction at 7.53% level. Overall, the government managed to absorb a total of IDR 5.60 trillion in the auction yesterday or IDR 12 trillion in the last two days of auctions. This figure also meets the indicative target set by the government of IDR 10 trillion.

Bond Issuance Plans of IDR 10.95 Trillion. The pipeline for issuance of corporate debt securities on the IDX is relatively quiet this time with a smaller issuance value compared to the same period last year. As of September 27, 2019, IDX has 13 debt instruments that are on the waiting list with emission values reaching IDR 22.89 trillion. Although the number of corporations that issued bonds and sukuk increased during the current year, the issuance value was lower than last year. The IDX recorded total issuance of bonds and sukuk throughout 2020 as of 25 September 2020 worth IDR 65.43 trillion from 53 issuing companies (issuers). This value is 25.45% lower than the total issuance of bonds and sukuk in the same period last year valued at IDR 87.77 trillion from 42 issuers. As of the end of last week, total issuance of bonds and sukuk on the stock exchange floor was 462 with an outstanding nominal value of IDR 441.34 trillion and USD 47.5 million issued by 127 issuers. (Investor Daily)

Liquidity Increases Dominated by Cash Supply. Economic liquidity or money supply in a broad sense (M2) increased again in August 2020. Bank Indonesia (BI) noted, M2 position last month was IDR 6,726.1 trillion or increased by 13.3% yoy, up from 10.5% yoy in the previous month. This increase was due to the increase in the narrow money supply component (M1) and the quasi money. Social assistance, which has begun to spread even to the middle class, so that they begin to spend the proceeds of social assistance for consumption, is a factor in the increase in the supply of cash. On the other hand, the increase in M2 was also supported by an increase in public savings, in line with the growth rate of third party funds (DPK) which reached 11.64% yoy in August, and one of the constituents of M2 includes time deposits. The forecast for the increase in public deposits is inseparable from the relatively high uncertainty on financial markets, both domestic and global, so that people are shifting to safer investments. (Kontan)

Investors are Interested in FR0083, amidst the depreciation of the rupiah and projected deflation in September 2020. Yesterday, the rupiah exchange rate was relatively flat on the spot market and BI’s middle rate, closing at IDR 14,880 / USD and IDR 14,918 / USD respectively. The results of the debate between the US presidential candidates have not shown any signs of improvement in the country, making the rupiah relatively flat. Meanwhile, the harvest season and the downward trend in prices for a number of commodities, have the opportunity to make September 2020 record deflation again. The high interest of FR0083 has made the yield of this series equivalent to the 15-year tenor of FR0080, which is around the 7.41% level based on Bloomberg data.

-REVIEW (Sept. 30, 2020)-
FR0081 (5yr): +0.9 Bps to 103.31 (5.68%)
FR0082 (10yr): +1.1 Bps to 100.51 (6.92%)
FR0080 (15yr): +0.6 Bps to 100.70 (7.41%)
FR0083 (20yr): -0.7 Bps to 100.76 (7.42%)

FR0086 (6yr): +0.6 Bps to 99.48 (5.60%)
FR0087 (11yr): +1.2 Bps to 97.53 (6.83%)

UST 2yr: +0.004 point to 0.12%
UST 5yr: +0.022 point to 0.27%
UST 10yr: +0.035 point to 0.68%
UST 30yr: +0.000 point to 1.45%
German Bund 10yr: +0.023 point to -0.52%
UK Gilt 10yr: +0.046 point to 0.22%

CDS 2yr: -5.15% to 47.70
CDS 5yr: -0.00% to 116.25
CDS 10yr: +0.12% to 179.66

WTI: +2.36% to USD40.22/Barrel
BRENT: +1.78% to USD42.30/Barrel
Source: Bloomberg