Earlier this week, the price of Government Securities (SUN) was under pressure again, as the yield of the 10-year US Treasury (UST) rose to a psychological level of 1.3% in trading last Friday (19/02). The concerns of a number of market players have made yields rise amidst the inflation risk in the United States (US). Yields increase when inflation increases, because the Fed has the potential to reduce loose monetary policy and reduce asset purchases. On the other hand, the increase in yield triggered higher cost of funds for bond issuers, which in turn suppressed the performance of shares on the stock exchange. The increase in UST yield also boosted yield and hampered movement in SUN prices. This external sentiment ignores the positive sentiment on the cut in the Bank Indonesia Seven Days Reverse Repo Rate (BI 7-DRRR) benchmark interest rate. Yesterday, the SUN prices for the benchmark series FR0086, FR0087, and FR0088 were again trading below the par level.

Waskita Karya is Ready to Pay Off IDR 1.17 Trillion Bonds. Waskita Karya (Persero) Tbk (WSKT) stated that it is ready to pay the principal of Waskita Karya Phase II sustainable bonds in 2018, series A, amounting to IDR 1.17 trillion. The bonds will mature on February 23, 2021. The series A bonds are part of the 2018 Waskita Karya Sustainable Bonds III with a principal amount of IDR 3.45 trillion which is divided into two series. In addition, there is a series B which amounts to IDR 2.27 trillion with a fixed interest rate of 8.25%. This series will mature in 2023. This year, Waskita Karya projects that the contract value will reach IDR 2.6 trillion in 1Q21. Meanwhile, the total target for new contracts is IDR 26 trillion, or down from IDR 31-32 trillion. (Investor Daily)

Government Sets Positive Investment List. The government has set a positive investment list (DPI) as stipulated in Presidential Regulation (Perpres) Number 10 of 2021 concerning the Investment Business Sector. This regulation will take effect as of March 4, 2021. The aim is to encourage the flow of capital from domestic investors and foreign investors into the country. Simultaneously, Perpres 10/2021 with other derivative regulations of Law (UU) Number 11 of 2020 concerning Job Creation will create a more lucrative investment climate in Indonesia. Perpres 10/2021 describes the DPI as consisting of three classifications. First, priority business fields with criteria are national strategic programs / projects (PSN), capital intensive, labor intensive, high technology, pioneer industry, export orientation, and orientation in research, development and innovation activities. Second, allocated business fields or partnerships with cooperatives and Micro, Small and Medium Enterprises (UMKM). Third, business fields with certain requirements and business fields that can be undertaken by all investment, including cooperatives and MSMEs. (Kontan)

Attractive Yield Encourages Interest in Sukuk Auction. A number of market players are paying close attention to the current yield of Sukuk, which still provides bright prospects for investors ranging from 6.5% to 6.7%. This is supported by the appreciation of the rupiah, which can increase Sukuk prices and lower yields, amid the trend of low interest rates. On the other hand, investors are keeping a close watch on external sentiment, the ability to pay debts of countries experiencing economic contraction as a result of the lockdown. NHKSI Research projects that the government will win the auction worth up to IDR 25 trillion. Market players will be interested in short tenor sukuk, or tenors of less than 5 years because they have the same financing structure as banking products. Meanwhile, pension funds and insurance investors will be interested in long tenors, because they offer higher yields. On the other hand, BI also has the potential to enter this auction, as an effort to reduce yields on all Sukuk tenors.