PBS028 (New Issuance) Weighted Average Yield of 7.95%. This figure is 20 bps lower than our projections, in line with the reduced risk profile of investing in Indonesia. Previously, NHKSI Research had projected that the PBS028 reward rate would be in the range of 8.15%-8.20%. The projection uses the reference yield PBS005 and PBS015, which are at the level of 8.05% and 8.36%. Meanwhile, the government succeeded in suppressing the cost of funds in the 26-year PBS028 issuance, in line with the improving investment risk profile in Indonesia. Indonesia’s 2-year tenor Credit Default Swap (CDS) recorded a decline of up to 5%, or the deepest decline compared to the 5-year and 10-year tenor CDS, which respectively declined by 4.4% and 4%. Market participants responded positively to the request of the President of Indonesia to form an economic recovery committee, expected to be able to encourage the realization of spending. We see that the absorption of PBS028 at the Sukuk auction yesterday was more dominated by investors in the insurance and pension funds sectors, who are chasing yields from long-term Sukuk.

SMI Records IDR 1.5 Trillion Bonds. Sarana Multi Infrastruktur will issue IDR 1.5 trillion bonds consisting of three series on Wednesday (07/22). Phase IV Bonds of Sarana Multi Infrastruktur, namely: Series A worth IDR 1.04 trillion with a coupon of 6.75% and maturing July 31, 2021; Series B worth IDR 256.3 billion with a coupon of 7.6% and maturing July 21, 2023; and Series C worth IDR 240 billion with a coupon of 8% and maturing on July 21, 2025. The results of the rating from the Indonesian Rating Agency (Pefindo) for this bond are idAAA (Triple A).

1H20 Budget Deficit Reaches IDR 257.8 Trillion. Corona virus pandemic contains a deficit of the 1H20 State Budget (APBN) for IDR 257.8 trillion or 1.57% of Gross Domestic Product (GDP). The deficit in nominal terms and this ratio is higher than the last three years, because in 1H16 the deficit reached IDR 230.7 trillion. Minister of Finance Sri Mulyani sees that the budget deficit this year can widen, as it is not yet predictable when the corona virus outbreak will be over. On the other hand, in the 2H20 period, we will see increased government spending. For the record, state revenue up to 1H20 was valued at IDR 811.2 trillion or only reached 47.7% of the target in Presidential Regulation (Perpres) No. 72 of 2020 worth IDR 1,699.9 trillion. Meanwhile, government spending has reached IDR 1,068 trillion or 39% of the allocation in the 72/20 2020 Prepres worth IDR 2,739.2 trillion.

An Attractive Spread Yield Pushes Capital Inflow. Spread yields between benchmark Government Securities (SUN) FR0082 10-year tenure with the same US Treasury, reaching 640 bps. This attractive spread yield can encourage domestic capital inflow, both for the bond market and the rupiah exchange rate. In addition, the Indonesian President’s request to form an economic recovery committee is expected to be able to encourage spending realization. Investors also responded positively to the discovery of the Covid-19 vaccine, and news of the approval of a stimulus package from the European Union worth 750 billion Euros. The pharmaceutical BUMN holding, Bio Farma, is ready to conduct a Phase III clinical trial of the Covid-19 vaccine. As an initial phase of clinical trial III, as many as 2,400 vaccines from Sinovac, China, arrived in Indonesia on July 19, 2020.


-REVIEW (July 21, 2020)-
FR0081 (5yr): -4.5 Bps to 101.16 (6.21%)
FR0082 (10yr): -4.1 Bps to 99.94 (7.00%)
FR0080 (15yr): -2.0 Bps to 100.23 (7.47%)
FR0083 (20yr): -3.2 Bps to 99.97 (7.50%)

UST 2yr: -0.007 point to 0.14%
UST 5yr: -0.014 point to 0.26%
UST 10yr: -0.010 point to 0.60%
UST 30yr: -0.003 point to 1.31%
German Bund 10yr: +0.000 point to -0.46%
UK Gilt 10yr: -0.016 point to 0.13%

CDS 2yr: -5.02% to 48.98
CDS 5yr: -4.40% to 120.57
CDS 10yr: -3.91% to 186.53

WTI: +2.44% to USD41.92/Barrel
BRENT: +2.40% to USD44.32/Barrel
Source: Bloomberg