Yield level is close to 7%, encouraging interest in FR0087. Initial 4Q20 SUN auction, with FR0087 posting bids of up to IDR 15.4 trillion. This figure has a share of more than 31% of yesterday’s bid for a total of IDR 49.4 trillion. Investors are interested in this 10-year benchmark candidate series, after posting a weighted average yield at the level of 6.81 percent, or 2 bps higher than the auction last September. Meanwhile, the FR0087 yield offer was in the range of 6.79% -6.95% with the highest yield won reaching 6.84%. The expected yield level for this series is close to 7% in the secondary market, as the government has set a higher indicative target for the 4Q20 SBN auction compared to previous quarters. In addition, the yield spread between FR0087 and UST 10-year is more than 600 bps, making foreign investors also interested in this series in yesterday’s auction.

TBIG Prepares Global Bond of USD 700 Million. Tower Bersama Infrastructure Tbk (TBIG) will issue global notes worth a maximum of USD 700 million, with a 10-year tenor and a maximum coupon of 6%. Meanwhile, the proceeds from this issuance will be used to pay off obligations that are due and accelerate the payment of debts of the subsidiaries. For the record, TBIG’s net debt to EBITDA ratio was 4.8x in the 2Q20 period. This figure is still below the financial covenant, which provides a maximum limit of 6.25x. Previously, TBIG had issued a global bond of USD 300 million which had been paid in March 2017. TBIG also has a global bond worth USD 350 million which will mature on February 10, 2022, and also a global bond worth USD 350 million due on January 21, 2025. (Kontan)

Consumer Optimism Decreased. Consumer optimism about the economic outlook for the next 6 months is weaker than the previous month. The Expectation Index for Economic Conditions (IEK) for September 2020 amounted to 112.6 or lower than 118.2 in August 2020. Consumers predict that the expansion of economic conditions is still limited, both in terms of business activities, job availability and increased income. In detail, this is indicated by the decline in the Business Activity Expectation Index from 115.5 in August 2020 to 106.4 in the reporting month. In line with that, the Job Availability Expectation Index in September 2020 fell from 114.4 to 109.2. In line with declining expectations of business activities and job availability, consumer expectations of an increase in income in the next 6 months have also been observed to weaken. This was indicated by the Income Expectation Index, which fell from 124.7 in the previous month to 122.2. (Kontan)

Market Positive Response to the New Law. Yesterday, the rupiah strengthened 0.44% to IDR 14,735 / USD on the spot market. Meanwhile, BI’s middle rate strengthened 1.04% to the level of IDR 14,712 / USD. Positive sentiment for the appreciation of the rupiah, along with the ease of investing in Indonesia through the passage of the Job Creation Law. So that economic recovery efforts through the effectiveness of domestic production can go according to plan. On the other hand, positive external sentiment comes from the US Treasury Secretary who will endorse the US stimulus plan. In the short term, investors can take advantage of selective buying action FR0086 which again recorded prices to their lowest level. Investors can also watch, the yield level of FR0087 is close to 7%.

-REVIEW (Okt. 6, 2020)-
FR0081 (5yr): -1.3 Bps to 103.11 (5.73%)
FR0082 (10yr): -1.7 Bps to 100.96 (6.86%)
FR0080 (15yr): -0.5 Bps to 101.03 (7.38%)
FR0083 (20yr): -0.8 Bps to 100.98 (7.40%)

FR0086 (6yr): +4.2 Bps to 99.07 (5.69%)
FR0087 (11yr): -0.8 Bps to 97.62 (6.82%)

UST 2yr: +0.001 point to 0.14%
UST 5yr: -0.024 point to 0.31%
UST 10yr: -0.047 point to 0.73%
UST 30yr: -0.053 point to 1.53%
German Bund 10yr: +0.001 point to -0.50%
UK Gilt 10yr: -0.001 point to 0.28%

CDS 2yr: -5.72% to 42.52
CDS 5yr: -4.86% to 104.64
CDS 10yr: -4.67% to 166.62

WTI: +3.69% to USD40.67/Barrel
BRENT: +3.29% to USD42.65/Barrel
Source: Bloomberg