Lowest FR0086 Price Ahead of 4Q20 Initial Auction. Based on Bloomberg data, the FR0086 price closed at 99.26 or the lowest level since this series was published. The indicative target for SBN auctions, both SUN and Sukuk 4Q20, reached IDR 212.93 trillion or the highest compared to previous quarters. The government’s high target indicates a large supply of SUN and Sukuk in the last quarter of this year. For the record, FR0086 is one of the series offered at this 4Q20 prime SUN auction. In the last auction, low yield expectations made the government aggressively win the FR0086. SUN is a 5-year benchmark candidate for IDR 3.2 trillion (bid to cover ratio 1.4x) from the bid for this series worth IDR 4.59 trillion. Meanwhile, the weigthed average yield of FR0086 was at the 5.51% level at the auction last September.

Four Issuers Issue IDR 4.26 Trillion Bonds and Sukuk. The four issuers are Sinar Mas Agro Resources and Technology Tbk (SMAR). This Sinarmas subsidiary is offering Continuous Bonds II SMART Phase II Year 2020 worth IDR 1.4 trillion, issued in three series. Series A will be issued with a principal value of IDR 572 billion, an interest rate of 8% and a tenor of 370 days. Meanwhile, Series B will be issued with a principal value of IDR 280 billion, an interest rate of 9.75% and a 3-year tenor. Then Series C was issued with a principal value of IDR 548 billion, an interest rate of 10.5% and a 5-year tenor. This bond received an A + rating from the Indonesian Securities Rating Agency (Pefindo). The second issuer still comes from the Sinarmas Group, namely Sinar Mas Multiartha Tbk (SMMA). The company will offer Continuous Bonds I Phase II worth IDR 875 billion. Series A with a principal value of IDR 1 billion has an interest rate of 9% and a 3-year tenor. Series B has a principal value of IDR 874 billion, an interest rate of 10.25% and a 5-year tenor. On the other hand, Indonesia Infrastruktur Finance offers bonds worth IDR 1.5 trillion. The bonds are offered in three series with a coupon range of 5% -6.9%. Furthermore, the last issuer is Bussan Auto Finance Indonesia Tbk (BAFI). The company will offer Sustainable Sukuk Mudharabah I Phase II worth IDR 485 billion, in two series with an equivalent yield range of 5.75% -7.25%. (Investor Daily)

BI is optimistic that Indonesia’s GDP in 2H20 is getting better. Optimism of Bank Indonesia (BI) in the middle, GDP in 3Q20 will experience a contraction. Although it will indeed improve from contraction in 2Q20 which was minus 5.32% YoY. The economic recovery in 2H20 was supported by increased realization of fiscal stimulus in the national economic recovery program (PEN), as well as the monetary policy mix provided by BI, as well as the business credit restructuring program. In addition, the improvement in economic conditions was also supported by increasingly advanced digitalization, especially in the fields of payment transactions as well as communication. Improvements in economic conditions are also inseparable from the relaxation of large-scale social restrictions (PSBB) carried out by the government and also the implementation of the new normal, in which people can start to carry out economic activities by paying attention to their health protocols. (Kontan)

Rupiah Appreciation Supports Initial Auction. Earlier this week, the rupiah exchange rate weakened 0.43% to IDR 14,800 / USD on the spot market. Meanwhile, BI’s middle rate strengthened 0.15% to the level of IDR 14,867 / USD. A number of market players tend to avoid the US dollar, post US economic and political uncertainties. In addition, the initial SUN auction this quarter was also supported by the decline in the risk profile for investing in Indonesia. Indonesia’s CDS 2-year tenor recorded the deepest decline, down to 4.3%. Then followed by the 5-year and 10-year tenor Indonesian CDS, which fell by 2.6% and 1.6%, respectively. Investors can take advantage of this momentum to selectively buy FR0086 and FR0087.

-REVIEW (Okt. 5, 2020)-
FR0081 (5yr): +0.0 Bps to 103.06 (5.74%)
FR0082 (10yr): -0.6 Bps to 100.84 (6.88%)
FR0080 (15yr): -1.1 Bps to 100.99 (7.38%)
FR0083 (20yr): +1.1 Bps to 100.90 (7.41%)

FR0086 (6yr): +0.6 Bps to 99.26 (5.65%)
FR0087 (11yr): +0.2 Bps to 97.56 (6.83%)

UST 2yr: +0.016 point to 0.14%
UST 5yr: +0.049 point to 0.33%
UST 10yr: +0.081 point to 0.78%
UST 30yr: +0.103 point to 1.59%
German Bund 10yr: +0.027 point to -0.51%
UK Gilt 10yr: +0.042 point to 0.28%

CDS 2yr: -4.30% to 45.10
CDS 5yr: -2.62% to 109.99
CDS 10yr: -1.69% to 174.79

WTI: +5.85% to USD39.22/Barrel
BRENT: +5.14% to USD41.29/Barrel
Source: Bloomberg