Yield Declining Trend Press 2Q20 Last SUN Auction. The government recorded a bid to enter the SUN auction Tuesday (6/30) worth IDR 72.03 trillion. This figure is 15.1% lower than the previous auction of IDR 84.82 trillion. In addition to the downward trend in yields, there is no investor interest in the 3-month tenor SPN03201001 (new issuance), which also suppressed bidding for auction this time. On the other hand, investors are also still paying close attention to the economic and global outlook which is expected to be lower than the initial projection. Meanwhile, the government managed to absorb funds worth IDR 20.5 trillion from yesterday’s auction. FR0081 is the most popular reference series for investors, valued at IDR 27.94 trillion with a weighted average yield of 6.51%. The yield was 16 bps lower than the FR0081 yield at the previous auction. From this benchmark series, the government absorbed funds worth IDR 7.4 trillion, as well as being the series that was won the most by the government.

Three Issuers Offer IDR 4.05 Trillion Bonds. The three companies are Merdeka Copper Gold Tbk (MDKA IJ) offering bonds worth IDR 1.4 trillion; Sarana Multigriya Financial (SMF) designed a publication of up to IDR 2.45 trillion; and Bussan Auto Finance is targeting sukuk and bond emissions worth IDR 200 billion. For the record, Merdeka Gold will hold a Sustainable Public Offering (PUB) I Phase I offers two series, namely 1-year and 3-year tenors. MDKA has been ranked A from Pefindo. Then, SMF issued a 1-year Series A tenor worth IDR 1.69 trillion with a coupon of 6.75%, and a Series B five-year tenor worth IDR 424 billion with a coupon of 8.1%. For Sukuk SMF offers a 6.75% profit sharing with a 370-day tenor. SMF has obtained AAA and AAA (sy) ratings from Pefindo. (Kontan)

Indonesia’s Debt Interest Expenses Increased to 17%. This is in line with the widening budget deficit to finance the handling of the impact of the Covid-19 pandemic. Through Presidential Regulation (Perpres) No. 72 of 2020, the government officially widens the 2020 State Budget deficit to 6.34% of GDP. Previously in Presidential Regulation 54 of 2020, the government set a budget deficit of 5.07% of GDP. Using the latest deficit reference, the Ministry of Finance stated that the debt to GDP ratio outlook for 2020 will increase to 37.6% of GDP. Thus, with the increase in debt, the ratio of debt interest payments to total government expenditure will also increase to 17%. (Kontan)

Investors Await Inflation Data Release. Today the direction of the bond market will be influenced by the inflation sentiment that will be released today. A number of market participants project that Indonesia has the potential for deflation. The development of the Covid-19 pandemic and regional stock movements will also remain a negative sentiment today. Fears of a second wave make the rupiah exchange rate relatively flat. Rupiah weakened 0.14% to IDR 14,265 / USD. Meanwhile, the BI middle rate strengthened 0.46% to the level of IDR 14,369 / USD. Investors are also watching external sentiment, a speech by the Governor of the Fed about the prospects for economic recovery. Meanwhile, China’s manufacturing PMI rose from 50.6 in May to 50.9 in June. In the short term, investors can look back at FR0081 and FR0082.

-REVIEW (June 30, 2020)-
FR0081 (5yr): -3.1 Bps to 99.98 (6.50%)
FR0082 (10yr): -1.5 Bps to 98.69 (7.18%)
FR0080 (15yr): -1.8 Bps to 99.14 (7.59%)
FR0083 (20yr): -0.7 Bps to 98.74 (7.62%)

UST 2yr: +0.000 point to 0.15%
UST 5yr: +0.015 point to 0.28%
UST 10yr: +0.033 point to 0.65%
UST 30yr: +0.038 point to 1.41%
German Bund 10yr: +0.016 point to -0.45%
UK Gilt 10yr: +0.008 point to 0.17%

CDS 2yr: -3.35% to 56.73
CDS 5yr: -1.38% to 133.60
CDS 10yr: -5.71% to 199.87

WTI: -1.08% to USD39.27/Barrel
BRENT: -1.38% to USD41.27/Barrel