SUN Mixed Ahead of FR0086 and FR0087 Benchmark Candidate Offering. Yields of reference series FR0081 and FR0082 closed at 5.85% and 6.77% levels at Monday’s closing, or not much different from the weekend position. For the record, starting tomorrow the FR0081 and FR0082 benchmarks will not be offered at the biweekly Government Bonds (SUN) auction. In exchange, the government through the Directorate General of Risk Financing Management (DJPPR) offered a new series (new issuance) FR0086 and FR0087 at the auction. Meanwhile, the tenors for the two series, namely 6-years and 11-years respectively, have the opportunity to become a benchmark to replace FR0081 and FR0082 which will have 4-year and 9-year tenors in 2021. Meanwhile, foreign investors’ interest in long tenors has not been able to suppress the yields of FR0080 and FR0083. Yields of the 15-year and 20-year benchmark series were relatively flat at 7.24% and 7.38%, respectively. Foreigners are interested in the higher yields found in the long tenor series, amid the trend of low interest rates.

Fitch: Downgrade of Alam Sutera’s Rating to CCC-. Fitch Ratings cut Alam Sutera Realty Tbk’s (ASRI IJ) rating from B- to CCC-. Meanwhile, the USD 115 million and USD 370 million dollar denominated debt securities were also downgraded from B- to CCC-. This cut indicates an increase in Alam Sutera’s liquidity risk to pay debt securities worth USD 115 million which will mature on April 22, 2021. Previously, Alam Sutera planned to issue new bonds worth USD 485 million on July 20, 2020. The refinancing plan is to pay bonds worth USD 485 million. USD 115 million and USD 370 million, which will mature in 2021 and 2022 respectively. Alam Sutera targets the maturity of this new global bond in 2024 at the earliest.

Fitch: Indonesia Debt Rating at BBB with Stable Outlook. International rating agency Fitch, sees that Indonesia’s medium-term economic growth is still good, and its debt burden is relatively low. Fitch also projects that Indonesia’s economy will again increase to 6.6% in 2021. This momentum will continue in 2022, namely growing at 5.5% supported by infrastructure development. Meanwhile, the 2020 fiscal deficit will increase to around 6% in 2020. This figure is projected to continue to decline to 5% and 3.5% in 2021 and 2022 respectively. Meanwhile, the burden sharing policy between BI and the government will not trigger inflationary pressure in 2020, in line with the still low demand. Fitch continues to pay close attention to Indonesia’s high dependence on external financing, low government revenue, and per capita GDP governance that is still below other countries.

Offers FR0086 and FR0087 amidst of Low Interest Rates Trend. Apart from the new FR0086 and FR0087 series, the government is also offering the FR0080, FR0083, and FR0076 again. Meanwhile, the short tenor SUN offered are SPN03201112 (new issuance) with 3-month tenor and SPN12210812 (new issuance) with 12-month tenor. Investors can look at the long tenors FR0083 and FR0076, which are currently in demand by foreign investors. A number of market players are interested in long tenors because they offer high yields amid the current low interest rate trend. Early in the week, the rupiah closed down 0.15% at IDR 14,648/USD on the spot market. Meanwhile, BI’s middle rate weakened 0.7% to the level of IDR 14,750/USD.

-REVIEW (Aug. 10, 2020)-
FR0081 (5yr): +0.0 Bps to 102.69 (5.85%)
FR0082 (10yr): -0.1 Bps to 101.64 (6.77%)
FR0080 (15yr): +0.7 Bps to 102.32 (7.24%)
FR0083 (20yr): +0.9 Bps to 101.22 (7.38%)

UST 2yr: +0.002 point to 0.13%
UST 5yr: +0.005 point to 0.23%
UST 10yr: +0.012 point to 0.57%
UST 30yr: +0.019 point to 1.25%
German Bund 10yr: -0.018 point to -0.52%
UK Gilt 10yr: -0.008 point to 0.12%

CDS 2yr: -0.55% to 44.77
CDS 5yr: -2.14% to 115.28 (as of Jul. 31, 2020)
CDS 10yr: -0.53% to 173.37

WTI: +1.74% to USD41.94/Barrel
BRENT: +1.32% to USD44.99/Barrel
Source: Bloomberg