High yield expectations, government did not win PBS028. Based on data from the Directorate General of Financing and Risk Management (DJPPR), incoming bids PBS028 (new issuance) yields up to 8.37% or higher than our previous projection between 8.15% -8 , 20%. These projections use the benchmark yields of PBS005 (43-years) and PBS015 (47-years), which are at the level of 8.05% and 8.36%, respectively. The low yield trend has prevented the government from winning the new 46-year Sukuk series. On the other hand, the government won many short tenors such as PBS002 (2-years) and medium-sized PBS026 (24-years). Besides SUN, low yield trends also occur in Government Sharia Securities (SBSN) or Sukuk. This is supported by the burden sharing policy, low inflation, and relaxation of Bank Indonesia (BI) monetary policy. On the other hand, investors’ wait and see attitude awaits the economic recovery process, making investors interested in short tenors. The PBS002 short-term sukuk booked an incoming bid of up to IDR 19.76 trillion or represented up to 47.5% of the total incoming offer of IDR 41.60 trillion. In the inaugural Sukuk 3Q20 auction, the government won IDR 9.5 trillion or higher than the indicative target of IDR 7 trillion.

OCBC NISP Repay Bonds Debt. Bank OCBC NISP Tbk (NISP IJ) will repay the Phase I Continuous Bonds Phase I of 2018 with a fixed interest rate of series B worth IDR 3 billion. Meanwhile, the source of funds to pay off bonds and interest debt comes from internal funds. Up to 1Q20, the company posted a net profit of IDR 791 billion, growing 3.4% YoY from IDR 765 billion last year. This increase was driven from other operating interest income by 57.8% YoY to IDR 719 billion. Meanwhile, net interest income grew 8.0% YoY to IDR 1.66 trillion, with total assets growing by 7.8% to IDR 191.5 trillion at the end of 1Q20. (Investor Daily)

Global Sukuk Pushes June Foreign Reserves BI recorded foreign reserves at the end of June at USD 131.7 billion or an additional USD 1.2 billion. The previous month cadev was valued at USD 130.5 billion. June’s position is even close to the highest record in history of USD 132 billion recorded in January 2018 last. The June foreign reserves increase was mainly influenced by the issuance of a global government sukuk valued at USD 2.5 billion on June 17, 2020. Another factor is inflow into the stock market and Government Securities in the secondary market, as well as foreign exchange from export proceeds. With this position, it means that Indonesia’s foreign reserves is equivalent to financing 8.4 months of imports or 8.1 months of imports and payment of government foreign debt. This condition is above the international adequacy standard which is around 3 months of import. (Kontan)

Foreign reserves positive sentiment, sustaining the market today. We project that bond market players will still respond positively to June’s foreign reserves, which is nearing record highs in history. Foreign reserves at the end of June was valued at USD 131.7 billion, an increase from the previous month of USD 130.5 billion. Market participants also responded positively to BI intervention through the burden sharing of the burden of the State Budget (APBN). Cooperation between BI and fiscal authorities can encourage greater economic stimulus. Meanwhile, the rupiah exchange rate has the opportunity to strengthen again. Yesterday, the rupiah strengthened 0.35% to a level of IDR 14,440 / USD in the spot market. While the BI middle rate strengthened 0.63% to the level of IDR 14,456 / USD. On the other hand, investors continue to pay close attention to the outlook for economic recovery in the 2H20 period. After a number of corporations reported a decline in performance during the 2Q20 pandemic period.

-REVIEW (July 7, 2020)-
FR0081 (5yr): -7.0 Bps to 100.29 (6.42%)
FR0082 (10yr): -8.6 Bps to 99.15 (7.11%)
FR0080 (15yr): -1.2 Bps to 99.20 (7.58%)
FR0083 (20yr): -0.8 Bps to 98.81 (7.61%)

UST 2yr: -0.000 point to 0.15%
UST 5yr: -0.016 point to 0.28%
UST 10yr: -0.037 point to 0.64%
UST 30yr: -0.064 point to 1.37%
German Bund 10yr: +0.004 point to -0.43%
UK Gilt 10yr: -0.021 point to 0.17%

CDS 2yr: +0.92% to 49.60
CDS 5yr: +0.41% to 120.47
CDS 10yr: +0.69% to 188.64

WTI: -0.02% to USD40.62/Barrel
BRENT: -0.04% to USD43.08/Barrel