Long Recovery in Domestic Economy, investors are interested in safe havens. All SUN benchmark series closed higher at the weekend, recording a decline in yield of 1.8 bps to 3.2 bps. A number of market players selective buy SBN of all tenors. Investors are pessimistic about the progression of Indonesia’s domestic economic recovery, as BI maintains its benchmark interest rate at 4%. Apart from the inflationary factor in the domestic and global financial system, BI’s decision was due to the fact that deposit and credit interest rates also started to decline. Previously, BI kept the 7-DRRR in September at 4% with the Deposit Facility and Lending Facility Rates at 3.25% and 4.75%, respectively.

Waskita Toll Road Convertible Bond IDR 2.5 Trillion. Waskita Toll Road proposes a convertible bond issuance plan with a maximum of IDR 2.5 trillion. The proceeds from the bond issuance will be used to repay loans to the company’s parent company, Waskita Karya Tbk (WSKT). Pefindo has assigned a BBB rating to this plan. Pefindo also pinned the BBB rating for Waskita Toll Road along with 2019 medium term notes (MTN) II. Meanwhile, the outlook for Waskita Karya’s rating was maintained negative. On the other hand, Pefindo considers Waskita Toll Road to have a high dependence on asset divestment to support business expansion. The company also has business risks related to the construction of new toll roads. Waskita Toll Road’s rating could be lowered if the divestment fails to materialize, followed by a debt burden that is higher than expected. This can weaken the capital structure and cash flow. (Investor Daily)

Economy weakens, Tax revenue prone to shortfall. Year 2020 tax revenue has yet to indicate recovery, in line with the impact of the pandemic. This condition is increasingly threatening that tax revenue will not reach the year-end target, aka shortfall. Previously, the government had twice revised its 2020 tax revenue target from a target of IDR 1,198.82 trillion. The tax revenue outlook is as stated in Presidential Decree 72/2020. This regulation is the second change in the posture of the 2020 State Budget. As for the end of July 2020, the realization of tax revenue was IDR 601.91 trillion or grew negatively by 14.67% YoY. The contraction is further away from the government’s projection of only 10% correction of the 2019 realization. Achievement of tax revenue in the first seven months of this year is equivalent to 50.21% of the total target at the end of the year. So, within five months the government needs to catch up with the remaining tax revenue of IDR 596.91 trillion. (Kontan)

The benchmark interest rates for three countries, are the sentiment for the movement of the bond market this week. Apart from the BI 7-DRRR, investors are watching the Fed, which keeps its interest rate at a low level of 0% -0.25%, with the value of the quantitative easing stimulus not being increased. The Fed is optimistic about the US economic recovery, revising GDP, inflation and the US unemployment rate. Meanwhile, the Monetary Policy Committee (MPC) of the Bank of England (BoE) agreed to keep the benchmark interest rate at the level of 0.1%. MPC also agreed to maintain a quantitative easing policy of GBP 745 billion. In the past week, the rupiah exchange rate strengthened 1.04% to IDR 14,735 / USD on the spot market. In the short term, investors can watch FR0086 and FR0087 which are returning to the par level.

-REVIEW (Sept. 18, 2020)-
FR0081 (5yr): -2.8 Bps to 104.01 (5.52%)
FR0082 (10yr): -3.1 Bps to 100.93 (6.86%)
FR0080 (15yr): -1.8 Bps to 100.89 (7.39%)
FR0083 (20yr): -3.2 Bps to 100.91 (7.41%)

FR0086 (6yr): -1.3 Bps to 99.89 (5.52%)
FR0087 (11yr): -4.2 Bps to 98.01 (6.76%)

UST 2yr: +0.003 point to 0.14%
UST 5yr: +0.005 point to 0.28%
UST 10yr: +0.005 point to 0.69%
UST 30yr: +0.014 point to 1.45%
German Bund 10yr: +0.005 point to -0.48%
UK Gilt 10yr: -0.002 point to 0.18%

CDS 2yr: -1.13% to 34.45
CDS 5yr: +2.27% to 92.71
CDS 10yr: -0.86% to 159.23

WTI: +0.34% to USD41.11/Barrel
BRENT: -0.34% to USD43.15/Barrel
Source: Bloomberg