Yield FR0082 Keeps Below 7%. Bond market stability is better as the portion of foreign investors is smaller. Based on data from the DJPPR as of 9 September 2020, the share of foreigners is currently only 28.2% or much smaller than the beginning of the year which was 38.6%. The re-implementation of the total PSBB in Jakarta has the potential to contract 3Q20 domestic GDP. However, this time the community is better prepared with health protocols and hospital availability. Domestic investors, particularly the banking sector, are currently responding positively to the attractive yield spread between UST 10 years and FR0082 which reached 626 bps. Meanwhile, high global unemployment rates have made foreign investors tend to avoid investing in emerging market countries with high beta. On the other hand, both domestic and foreign investors are keeping a close watch on the current depreciation of the rupiah. Yesterday, the rupiah weakened 0.38% to IDR 14,855 / USD on the spot market.

Tower Bersama Oversubscribed Bonds 2.5x. Tower Bersama Infrastructure Tbk (TBIG) has been oversubscribed by investors up to 2.5x for Sustainable Bonds IV phase I 2020 worth IDR 700 billion. The high interest of investors has made the company pay back (refinancing) its bond debt with new bonds that have lower interest rates. For the record, the incoming bids from investors reached IDR 1.7 trillion. Meanwhile, TBIG bonds consist of two series, namely First, worth IDR 231 billion with an interest rate of 6.3% and a tenor of 370 days, and Second, worth IDR 469 billion with an interest rate of 8% and a tenor of 3 years. Tower Bersama will use the proceeds from the issuance to partially repay the Bond II Phase III 2017 with a fixed interest rate of 8.4% which will mature on September 19, 2020. Fitch Ratings Indonesia has assigned an AA- rating for the bonds. The IV Tower Bersama sustainable bond program has a total target fund of up to IDR 7 trillion which is valid for two years. (Investor Daily)

Jakarta PSBB Press the Economy 3Q20. Total Large-Scale Social Restrictions (PSBB) will be re-implemented in DKI Jakarta. Center of Reform on Economics (Core) economist Piter Abdullah said economic growth would contract by more than 3% in 3Q20. In 2Q20, the Indonesian economy experienced economic growth of minus 5.32%. This means that if in the next 3Q20 the Indonesian economy returns to a negative, then Indonesia is technically in the definition of a recession. Piter assessed that with the tightening of the PSBB again, the wheels of the economy which began to move during the PSBB transition period will slow down again. Lending started to grow, especially with a boost in liquidity by the government, but things will slow down again. However, Piter hopes that the tightening of the PSBB can really reduce the number of Covid-19 transmission which has continued to increase in recent times. (Kontan)

Investors are interested in long tenors, press the yield for FR0083 to approach the FR0080 level. A number of investors are looking for attractive yields amid the current low interest rate trend. The 20-year benchmark SUN series FR0083 posted a yield of 7.45 percent or close to the yield for FR0080 which was at 7.43 percent yesterday, according to Bloomberg data. In the short term, the volatility of the bond market is influenced by the capital outflow of foreign investors and the depreciation of the rupiah. However, in the long term, investors will still respond positively to the yield spread between UST and Indonesian SUN bonds with the same tenor of 10 years, which reached 626 bps. The high share of domestic investors in SBN holdings has reduced the correlation between yield increases. Investors can take advantage of the momentum, watching FR0086 which closed below par, and FR0087 which recorded a yield increase of almost 17 bps.

-REVIEW (Sept. 10, 2020)-
FR0081 (5yr): +10.7 Bps to 103.75 (5.58%)
FR0082 (10yr): +8.5 Bps to 100.44 (6.93%)
FR0080 (15yr): +4.4 Bps to 100.60 (7.43%)
FR0083 (20yr): +4.9 Bps to 100.42 (7.45%)

FR0086 (6yr): +8.3 Bps to 99.63 (5.57%)
FR0087 (11yr): +16.7 Bps to 96.86 (6.92%)

UST 2yr: -0.008 point to 0.14%
UST 5yr: -0.014 point to 0.26%
UST 10yr: -0.024 point to 0.67%
UST 30yr: -0.038 point to 1.42%
German Bund 10yr: +0.030 point to -0.43%
UK Gilt 10yr: -0.010 point to 0.22%

CDS 2yr: +3.26% to 35.12
CDS 5yr: +0.31% to 89.24
CDS 10yr: +1.08% to 154.60

WTI: -7.56% to USD36.76/Barrel
BRENT: -5.30% to USD39.78/Barrel
Source: Bloomberg