Based on the survey, the Bank Indonesia benchmark interest rate (BI 7-DRRR) for the May period remained at the level of 3.50%, or the lowest level in its history. The yield of 10-year Government Securities (SUN) FR0087 fell to a level of 6.45%. The increase in SUN prices, or the decrease in SUN yield, was also in line with the decline in UST yield. On the other hand, the potential for an increase in US inflation is a concern of global financial markets. Market participants worry that this will force the Fed to implement its tight monetary policy. The movement of the SUN market at the beginning of the week, also in the midst of awaiting SUN auction, offered the FR0086, FR0087, FR0088, FR0083, and FR0089 series.

PLN’s Net Profit Soared to IDR 5.9 Trillion. The State Electricity Company (Persero) (PLN) managed to record an increase in net profit attributable to parent entity owners of IDR 5.95 trillion in 2020, an increase of IDR 1.68 trillion or 39.3% of the 2019 net profit of IDR 4. 27 trillion. The surge in PLN’s net profit during the Covid-19 pandemic in 2020 is due to the technical and operational efficiency, as well as innovation through the PLN transformation program which has been running since April 2020. PLN’s 2020 net profit could increase by IDR 13.6 trillion if it does not consider the recording of unrealized foreign exchange loss of IDR 7.7 trillion, as well as additional recognition of revenue from customer connection of IDR 5.9 trillion if the recording is carried out the same as in 2019 which have not implemented PSAK 72. (CNBC Indonesia)

APBN Deficit Reaches IDR 138.1 Trillion. The Ministry of Finance (Kemenkeu) reported that the realization of the State Budget (APBN) deficit until the end of April 2021 reached IDR 138.1 trillion. This amount is equivalent to 0.83% of Indonesia’s gross domestic product (GDP). Furthermore, this deficit was due to state revenues which only grew by 6.5% YoY or equivalent to IDR 585 trillion. Meanwhile, state spending grew by 15.9% YoY to reach IDR 723 trillion. Revenues from growth in the realization of state revenues are still thin due to tax revenues. Until the end of April 2021, tax payments collected were only IDR 374.9 trillion, or a contraction of 0.5% YoY. (Kontan)

Investors are Interested in FR0086 and FR0087. Market players are likely to be interested in short and medium tenors at this SUN auction, amidst the wait and see attitude for the release of the BI 7-DRRR data. In the previous auction, the benchmark SUN for 5-year and 10-year tenors recorded incoming bids of up to IDR 12.3 trillion and IDR 19.6 trillion. Both series recorded a bid to cover ratio of 1.5x and 2x, respectively. Investors are still interested in this auction, supported by the spread of real yield on SUN which is still around 500 bps, using the assumption of 1.4% inflation and the yield on 10-year SUN at 6.5%.