Next Week's SUN Auction Will Still Be Affected By External Sentiment

The government will hold an auction of Government Securities (SUN) in Rupiah currency (photo: dock. bei)

JAKARTA - The government will hold an auction of Government Securities (SUN) in Rupiah currency on Tuesday, October 31. At this SUN auction, the government set an indicative target of IDR 19 trillion IDR 28.5 trillion. Analysts estimate that next week's auction will still be influenced by external sentiment, namely the Fed's interest rate.

HPAM's Head of Business Development Division, Reza Fahmi, said that the SUN's auction prospect would be influenced by several factors, such as market liquidity conditions, investor appetites, global interest rates as well as geopolitical and global economic sentiment.

Reza conveyed that the sentiment of market liquidity conditions will affect the SUN auction where how much funds are available to invest in state debt securities.

"High liquidity will increase demand and lower SUN yields, while low liquidity will lower demand and increase SUN yield," he explained to VOI, Saturday, October 28.

Reza said a high appetite would increase demand and lower SUN yields, while low appetites would lower demand and increase SUN yields.

In addition, other factors come from global interest rates, especially the Fed's benchmark interest rate in the United States. High interest rates will attract capital flows out of the growing country bond market, including Indonesia, and increase SUN yields.

Low interest rates will drive capital flows into the emerging bond market, including Indonesia, and reduce SUN yields.

Furthermore, geopolitical sentiment and the global economy will be influenced, such as trade wars, the Covid-19 pandemic, US elections, and others. Meanwhile positive sentiment will increase investor confidence and reduce SUN yields. Negative sentiment will lower investor confidence and increase SUN yield.