Trade Balance and BI 7-DRRR Sentiment SUN Support Weekend. The Central Statistics Agency recorded a balance of trade in the 1H20 period with a surplus of USD 5.50 billion. This figure is better than the same period the previous year which recorded a deficit of USD 1.87 billion. This positive signal of rising imports is supported by the June 2020 trade balance which has a surplus of USD 1.27 billion. Then followed by positive sentiment the decision of the Bank Indonesia Board of Governors’ Meeting (BI) to cut the July 7-day reverse repo rate (BI 7-DRRR) interest rate by 25 bps to 4%. The current interest rate is the lowest in history, after BI cut up to 100 bps since the beginning of this year at the level of 5%. Last weekend, the benchmark Government Bonds (SUN) closed varying with the reference FR0081 and FR0082 respectively, recording yields at 6.25% and 7.03% respectively. The bond market movement last week, amidst the wait and see action of foreign investors along with the surge in positive cases of the Covid-19 corona virus.

Modernland Increases Ratings from Fitch. Rating Agency Fitch Ratings has upgraded the rank of Modernland Realty Tbk (MDLN IJ) from restricted default to CC in line with the IDR 150 billion bond restructuring. The restructuring made the new MDLN pay the principal bond July 7, 2021 from the original July 7, 2020. However, the CC rating in Modernland Realty still reflects poor liquidity, and the possibility of default in the near future. Fitch assessed, MDLN’s liquidity remained poor and the company was relatively facing the challenges of paying interest and interest payments, including coupon payments of USD 8 million for bonds that will mature on August 30, 2020.

World Bank: Projects Indonesia’s Poverty Rate to 9%. The World Bank estimates that the Covid-19 pandemic will push Indonesia’s poverty rate to 8.2% to 9%. The projection uses the assumption of removing the 3Q20 and 4Q20 mobility restrictions. This situation indicates, First, in a mild impact there will be 1.3 million households that move out of poverty. Second, on the heavy impact there will be an additional 920,000 new households that fall into the poverty level. Meanwhile, the percentage is lower when compared to the potential increase in poverty if there is no assistance from the government, which can reach 10.7% to 11.6%. On the other hand, if the government runs a national economic recovery (PEN) program, the poverty rate in non-metropolitan rural areas can be below 8.7%.

The government is offering PBS028 New Issuance, at the Sukuk auction on Tuesday (07/21) tomorrow. The 26-year PBS028 will complement other long-term Sukuk, such as the 23-year PBS005 and the 27-year PBS015. We project PBS028 to provide reward rates in the range of 8.15% -8.20%, using the benchmark yields PBS005 and PBS015. Meanwhile, the movement of the bond market this week minimal domestic sentiment. Relative market participants will follow the direction of the regional exchanges, by observing the release of initial forecast data for the US and EU Purchasing Manager Index (PMI) which is projected to rise. The expectation is expected to be a positive sentiment for the Indonesian bond market. Last weekend, the rupiah depreciated 0.53% to a level of IDR 14,703 / USD. While the BI middle rate weakened 1.01% to a level of IDR 14,780 / USD. In the short term, investors can take advantage of the volatility of the reference series FR0081 and FR0082 that move around the par level.


-REVIEW (July 17, 2020)-
FR0081 (5yr): +3.0 Bps to 101.02 (6.25%)
FR0082 (10yr): +2.5 Bps to 99.75 (7.03%)
FR0080 (15yr): -0.1 Bps to 100.12 (7.48%)
FR0083 (20yr): +0.7 Bps to 99.58 (7.53%)

UST 2yr: -0.001 point to 0.14%
UST 5yr: +0.008 point to 0.28%
UST 10yr: +0.009 point to 0.62%
UST 30yr: +0.020 point to 1.32%
German Bund 10yr: +0.018 point to -0.45%
UK Gilt 10yr: +0.023 point to 0.16%

CDS 2yr: -0.64% to 52.17
CDS 5yr: -0.41% to 127.09
CDS 10yr: -0.52% to 196.07

WTI: -0.39% to USD40.59/Barrel
BRENT: -0.53% to USD43.14/Barrel
Source: Bloomberg