The yield on the 10-year US Treasury (UST) rose 1.5 bps again, or was approaching the psychological level of 1.3% last week. The increase in UST yield made the yield spread on 10-year Government Securities (SUN) narrower to around 530 bps. This less attractive yield on SUN has prompted market players to sell SUN benchmark series. Prices for the FR0086, FR0087, and FR0088 benchmarks were closed at discount levels, based on data from NH Korindo Sekuritas. Previously, Bank Indonesia (BI) cut the BI 7 Days Reverse Repo Rate (BI 7-DRRR) by 25 bps to 3.5%. BI also cut its Deposit Facility and Lending Facility rates by 25 bps, to 2.75% and 4.25%, respectively.
Mandiri Tunas Finance Issues IDR 1.5 Trillion Bonds. Mandiri Tunas Finance (MTF) plans to issue bonds amounting to IDR 1.5 trillion in May. These bonds are part of the Sustainable Public Offering (PUB) V with a total value of IDR 5 trillion. The bond issuance is the company’s strategy to diversify funding this year. The source of funds from bonds reaches 30% of total funding, while the other 70% comes from banks. With the issuance of the bonds, it can support the company’s financing this year, which is targeted to grow 19-20 percent. Previously, the company booked IDR 19.7 trillion in financing in 2020. (Investor Daily)
Indonesia’s Balance of Payments Deficit USD 0.2 Billion. Indonesia’s balance of payments in 4Q20 experienced a deficit of USD 0.2 billion. Earlier in 3Q20, the NPI posted a USD 2.1 billion surplus. The movement of Indonesia’s trade balance is influenced by low deficit capital and financial transactions amid a continuing surplus in the current account. In more detail, capital and financial transactions in 4Q20 recorded a deficit of USD 0.9 billion, equivalent to 0.3% of Gross Domestic Product (GDP). In fact, in 3Q20 the capital and financial account recorded a surplus of USD 1.0 billion or 0.4% of GDP. Other investment transactions recorded a large deficit, due to an increase in payments on maturing loans and placement of deposits and other assets abroad. (Kontan)
Pay Attention to UST Yield Increase. Last week, UST yields rose, causing volatility in US financial markets. The 10-year UST yield rose significantly, approaching the 1.3% level last week, or at its highest level since February 2020. The UST yield hike was in line with rising US inflation expectations. The US economic recovery will automatically increase the demand for inflation pressure. When inflation increases, bond yields will follow, making investors expect higher yields so that investment returns are not eroded by inflation. Investors can start to look at PBS027, PBS017, PBS029, PBS004, and PBS028, namely the five Project Based Sukuk series that will be offered at the Sukuk auction next Tuesday.