Ministry Of Finance: Interest In SUN Auction Decreases Due To The Heat Of Middle East Geopolitical Tennision

JAKARTA - Director of Government Securities of the Directorate General of Financing and Risk Management of the Ministry of Finance, Deni Ridwan, said that the interest in the auction of Government Securities (SUN) on October 17, 2023 decreased due to increased geopolitical tension in the Middle East.

The number of bids included in today's SUN auction was recorded to have decreased to IDR 16.99 trillion, lower than the previous auction of IDR 22.42 trillion on October 3, 2023.

"The concern over the increase in world oil prices as a result of the increasing geopolitical tension in the Middle East has pushed the risk off mode mainly on emerging markets assets," Deni said in a written statement, quoted Wednesday, October 18.

In addition to concerns about geopolitical issues, Deni also said that the Fed's policy, which is believed to maintain interest rates at a high level for a longer period of time, still maintains the wait and see attitude of investors.

The Ministry of Finance noted that the number of offers from foreign investors at today's SUN auction reached IDR 2.58 trillion, with the majority being on an 11-year SUN with a tenor of IDR 1.66 trillion or 64.32 percent of the total incoming bids for foreign investors, and won IDR 1.04 trillion or 10.18 percent of the total paid bids.

SUN tenor 5 and 11 years is still the main interest of investors with an incoming offering of IDR 10.03 trillion or 60.87 percent of the total income bids, and won IDR 6.55 trillion or 64.22 percent of the total awarded bids.

Deni also explained that financial market volatility in recent times has pushed up the average yield increase demanded by investors. Weighted Average Yield (WAY) won at today's SUN auction rose between 1 to 4 bps from the previous SUN auction level.

Overall, the government decided to win an offer of IDR 10.2 trillion at today's SUN auction, taking into account the reasonable return on Government Securities (SBN) in the secondary market, plans for financing needs in 2023, and the current state budget conditions.

In accordance with the calendar for the issuance of SBN in 2023, the next SUN issuance auction will be held on October 31, 2023.