The US Stimulus Agreement Boosted SBN Prices. The majority of Government Securities (SBN) prices closed higher. A number of market players responded positively to fiscal stimulus sentiment in the United States (US). Yields on 10-year and 30-year Government Securities decreased by 3.9 bps respectively. Meanwhile, the steepest drop in yield was recorded by the 15-year SBN, which fell 8.4 bps. The positive sentiment comes from the almost final US stimulus deal. This ongoing negotiation is an effort to restore the US economy which then has a positive impact on the global economy. On the other hand, short tenor 1-year government bonds were relatively released by investors. The 1-year SBN yield increased by 1.1 basis points to the level of 4.14%.
Fitch Cuts WIKA’s Rating to A -. Fitch Ratings Indonesia has lowered Wijaya Karya (Persero) Tbk’s (WIKA) long-term national rating to A- from A. At the same time, Fitch Ratings has affirmed the Default rating of Foreign Currency and Currency Issuers Long-term Local Currency (IDR) at BB-. Fitch removed all Wijaya Karya’s debt ratings from Rating Watch Negative, which was pinned on September 10, 2020 with a negative outlook. The affirmation follows Fitch’s review of the company’s relationship with the government. The strengthening of the rupiah exchange rate continues to make WIKA’s International Mandiri Credit Profile (SCP) rise to ‘b-‘. However, Fitch revised the national SCP rating up three notches to ‘bbb- (idn)’, from the previous four, which resulted in a downgrade of the National Long-Term rating. Fitch revised its support record and expectations factor to weak from strong, because government support, although ongoing, was unable to maintain WIKA’s credit profile in the face of the pandemic, as reflected in the weakening of its SCP. (CNBC Indonesia)
Cigarette excise increases, the government controls tobacco imports. The government needs to control tobacco imports, as a solution to overcome farmers’ protests over the planned increase in the average tobacco excise tariff (CHT) next year. Through its fiscal instruments, the Ministry of Finance (Kemenkeu) can increase the import duty on tobacco by up to 15%. Data from the Central Statistics Agency (BPS) shows that tobacco imports in 2019 reached 110.92 tons per year. Thus, with the imposition of higher import duties on tobacco, it is hoped that the government can maximize local tobacco output. For the record, President Joko Widodo has given directions to the Minister of Finance Sri Mulyani to set the 2021 cigarette excise rate in the range of 13-20 percent. Then, the Minister of Finance proposed a middle way, with a rate of 17%. Meanwhile, the Retail Selling Price (HJE) for next year will still be 85%. This will make: First, smokers are susceptible to exposure to the corona virus disease 2019 (Covid-19). Then, with the increased excise tax, the price of cigarettes will be more expensive, so that cigarette consumption can be more controlled. Second, this year an economic recession is certain to occur and the impact will be felt by the community in the next year. (Kontan)
Looking forward to US stimulus agreement between Democrats and Republicans. US stimulus plans will still prop up the movement of the bond market today. The tug of war for US stimulus has received much attention from global financial markets. Many market players are expecting the outcome of an agreement between Democrats and Republicans on stimulus this week. Giving US stimulus will put pressure on the US dollar exchange rate, and vice versa is good for the rupiah. This is evident from the decreasing yield on Indonesian SBN. Yesterday, the rupiah strengthened 0.17% to IDR 14,632 / USD on the spot market. Meanwhile, BI’s middle rate strengthened 0.48% to IDR 14,658 / USD. Next week, the government will offer five series at the Sukuk auction Tuesday (27/10), namely: SPNS14042021, PBS027, PBS026, PBS025, and PBS028.