Lack of Sentiment Pressured SUN Benchmark. SUN prices were under pressure on Thursday (27/08) trading. In addition to the GDP for the 3Q20 period which is projected to be still negative, market players have responded negatively amid the record positive cases of Covid-19. Both SUN benchmarks and FR0086 and FR0087 all recorded yield increases. The highest yield increases were recorded by FR0083 and FR0087, which rose 5.1 bps to 7.35% and 4.6 bps to 6.59%, respectively. Investors responded negatively to the record-high record of positive cases in Jakarta which reached 820 people in a day, making the Jakarta Regional PSBB again extended until September 10. This policy means that the entire 3Q20 will be skipped with a PSBB which further increases the risk of a recession.

SR013 Offer 6.05% Rewards. The government began offering retail sukuk series 13 (SR013) starting today (28/08) to 23 September 2020. With less risk than deposits, the SR013 returns are attractive amid the trend of low interest rates and there is still room for BI cuts 7-DRRR. Meanwhile, retail sukuk tax is only 15% or less than deposits which reach 20%. On the other hand, the SR013 offering period coincided with the maturity date of SBR004. The two investment products have relatively the same investor risk profile, making SBR004 investors switch to SR013. For the record, SR013 has a holding period of three months, or can only be traded on the secondary market starting December 11, 2020.

Trade Balance Surplus. Indonesia’s trade balance recorded a surplus at the end of last month, which has a negative impact on taxes on the currently depressed import trade. The Central Statistics Agency (BPS) reported that in July 2020 a surplus of USD 3.26 billion was recorded, making the trade balance surplus for three consecutive months since May 2020. This figure is due to the high non-oil and gas balance surplus, even though at the same time the oil and gas balance experienced a surplus. An increase in deficit, particularly an increase in fuel imports due to rising demand after the easing of the PSBB. Meanwhile, exports in July 2020 increased by 14.33% on a monthly basis, driven by non-oil and gas exports, especially basic precious metals, whose global prices increased significantly. On the import side, there was a decline in imports on a monthly and yearly basis, the impact of pressure on non-oil and gas imports, especially imports of basic iron / steel and automotive goods.

Positive Sentiment for the Fed’s Inflation Speech. Investors have the opportunity to respond positively to the Fed’s new inflation strategy. The US central bank will allow inflation to move above the 2% target. This means that interest rates near 0% will be maintained for the time being. The trend of low interest rates provides room for the bond market to return to record yield cuts. Investors can start looking at FR0086 and FR0087 which are recording corrections. Meanwhile, long tenors are attractive to investors looking for higher yields. Investors can look at FR0083 and FR0076. Yesterday, the rupiah strengthened 0.12% to IDR 14,660 / USD on the spot market. Meanwhile, BI’s middle rate weakened 0.53% to IDR 14,714 / USD.


Surplus Indonesia Trade Balance


Lower Bank Net Interest Margin

-REVIEW (Aug. 27, 2020)-
FR0081 (5yr): +0.2 Bps to 104.07 (5.51%)
FR0082 (10yr): +2.5 Bps to 101.60 (6.77%)
FR0080 (15yr): +2.6 Bps to 101.65 (7.31%)
FR0083 (20yr): +5.1 Bps to 101.49 (7.35%)

FR0086 (6yr): +0.6 Bps to 100.36 (5.42%)
FR0087 (11yr): +4.6 Bps to 99.28 (6.59%)

UST 2yr: +0.008 point to 0.15%
UST 5yr: +0.029 point to 0.31%
UST 10yr: +0.064 point to 0.75%
UST 30yr: +0.097 point to 1.51%
German Bund 10yr: +0.009 point to -0.40%
UK Gilt 10yr: +0.034 point to 0.33%

CDS 2yr: +0.43% to 36.81
CDS 5yr: +1.62% to 103.60 (as of Aug 20, 2020)
CDS 10yr: +2.25% to 173.22

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