Global Market Update
• U.S. ISM Manufacturing PMI decrease 1.1 points from previous month to 59.5 in July-21.
• 10 year U.S. treasury yield dipped to 1.18%. In the last 7 days U.S. reported an average of 63,000 daily Covid-19.
• Last month China factory activity grew at its slowest pace in 17 months. Caixin Manufacturing PMI for July-21 reading was at 50.3 or 1 point lower than previous month.
• Ongoing concern about the widespread of Delta variant and slower than expected China economy have pushed down government bond yield further.
• U.S. equity market closed mixed with DJI slipped 0.28%, S&P 500 fell 0.18% while tech heavy Nasdaq Composite gained 0.06%.
Domestic Market Update
• The implementation of PPKM Darurat in July-21 has caused manufacturing activity to contract and inflationary pressure low.
• In July-21 Markit Manufacturing PMI was at 40.1 while CPI grew 1.52% YoY below central bank target.
• 10 year Indo GB yield stayed flat at 6.29% or 3 bps higher than -1STD fair yield valuation.
Market Projection
• Today’s market sentiment is coming from the extension of PPKM Level 4 up until Aug 9, 2021 as announced by President Joko Widodo.
• The decline in 10 year U.S. treasury yield could be a positive catalyst for Indo GB price. We expect 10 year benchmark yield to stay traded within narrow range of 6.28-6.30% for today.
• Short term trading strategy may be applicable during potential sideways of market movement. In our view, FR0086, FR0078, FR0082, FR0087, FR0068 and FR0083 to remain attractive for trading purpose.
• We believe government would achieve its indicative target of IDR33tn for today’s auction on the back of banks liquidity that remained ample, low external pressure that keep rupiah and risk premium stable and investor preference toward safer asset such as government bond.
Disclaimer
