Non-Total PSBB Supported SUN Early Week. Optimism of market players recovered, eyeing short and medium tenor SUN. Most of SUN was collected by investors yesterday, with the yield of FR0082 at the level of 6.89%. Except for the long tenor SUN FR083 which recorded an increase in yield to the level of 7.43%. The market has responded positively to the implementation of the Jakarta PSBB as of September 14, considering that several business and transportation sectors are still operating. Even this time, the PSBB was looser than the total PSBB in April-June which had pushed the yield up.

Fitch Cuts Wijaya Karya’s Rating. Fitch Ratings has lowered its long-term rating for foreign currency and local currency issuer default rating (IDR) of state-owned construction company Wijaya Karya (Persero) Tbk (WIKA) to BB- from ‘BB’. At the same time, Fitch Ratings Indonesia has downgraded WIKA’s long-term national rating to A (idn), from AA- (idn). All ratings are placed in a Negative Rating Watch (RWN). The downgrade follows Fitch’s revision of WIKA’s Standalone Credit Profile (SCP) to ‘b-‘ and ‘bbb- (idn)’, from ‘b’ and ‘bbb + (idn)’, respectively. This reflects the company’s significantly weaker-than-expected second-quarter performance, where leverage as measured by net debt per EBITDA increased above 5x, the rate at which Fitch could undertake negative rating action. Fitch projects that leverage will remain high in the next few years. (Kontan)

Monetary Gold Supports Foreign Exchange Reserves. The position of Indonesia’s foreign exchange reserves at the end of August 2020 increased to US $ 137 billion. This increase in foreign exchange reserves comes from several components of foreign reserves, one of which is monetary gold or monetary gold. According to data presented by the Special Data Dissemniation Standard (SDDS), Bank Indonesia, the monetary gold component in Foreign Exchange Reserves in August 2020 was recorded at USD 4.98 billion, an increase from the previous position of USD 4.96 billion. The increase in the foreign exchange component of gold was caused by the increase in gold prices and the trend of the central bank to increase its monetary gold reserves. The jump in gold prices was also caused by the decline in confidence in the US dollar, in line with the decline in the US dollar index by 4.1% YtD. This pressure on the US dollar is influenced by the US and Chinese trade wars, as well as political uncertainty ahead of the November 2020 US presidential election. (Kontan)

Investors Again Look at PBS027. The banking sector, as the largest share of SBN holdings, has the opportunity to return to interest in the short tenor PBS027. This short tenor sukuk has a relatively good yield and is adjusted to bank liquidity. In the previous sukuk auction, this 3-year Sukuk recorded incoming bids of up to IDR 8.76 trillion or nearly 23% of the total Sukuk auction bids worth IDR 38.32 trillion. The total nominal value won by the government from the five series offered is worth IDR 9.5 trillion, at the Sukuk auction in early September 2020. Early in the week, the rupiah closed 0.07% higher to IDR 14,880 / USD on the spot market. Meanwhile, BI’s middle rate strengthened 0.03% to IDR 14,974 / USD.

-REVIEW (Sept. 14, 2020)-
FR0081 (5yr): -3.2 Bps to 104.11 (5.50%)
FR0082 (10yr): -3.1 Bps to 100.71 (6.89%)
FR0080 (15yr): -1.1 Bps to 100.90 (7.39%)
FR0083 (20yr): +0.3 Bps to 100.68 (7.43%)

FR0086 (6yr): -0.7 Bps to 99.72 (5.55%)
FR0087 (11yr): -2.3 Bps to 97.60 (6.82%)

UST 2yr: +0.009 point to 0.13%
UST 5yr: +0.013 point to 0.26%
UST 10yr: +0.007 point to 0.67%
UST 30yr: -0.000 point to 1.41%
German Bund 10yr: +0.000 point to -0.48%
UK Gilt 10yr: +0.012 point to 0.19%

CDS 2yr: -1.58% to 34.67
CDS 5yr: +1.81% to 90.86
CDS 10yr: -1.24% to 156.48

WTI: -0.18% to USD37.26/Barrel
BRENT: -0.55% to USD39.61/Barrel
Source: Bloomberg