Global Market Update
• The 10-year U.S. treasury yield lowered 3 bps to 1.43% on Thursday (12/16/21). U.S. treasury yields noted a fall of 1-8 bps along the curve.
• U.S. stocks market closed weaker last night with DJI slipped 0.08%, S&P 500 edged down 0.87% while Nasdaq Composite plunged 2.47%.
• The U.S. president Joe Biden officially signed the legislation of debt ceiling increase of USD2.5tn sent by the Congress in order to ensure the country’s ability in paying back its obligation until 2023.
• The initial claims for unemployment in the U.S. rose to a seasonally adjusted rate at 206,000 for the week ending of December 11th. This was a 9.6% higher than the prior week’s figure surpassing the consensus of 200,000.
• U.S. housing starts also strengthened to 1.679mn in Nov-21, up from 1.502mn as of Oct-21 further exceeded the market projection of 1.568mn.
• Yesterday, Bank of England (BoE) lifted its interest rates to 0.25%, or 15 bps higher the estimates of 0.1% as a response to the higher pressures posed by inflation hikes outweighing Omicron uncertainty.
• On the data front, U.K. inflation rate noted an increase to 5.1% YoY in Nov-21, well above the central bank’s target of 2% hitting its highest in 10 year-time. Meanwhile, the labor market recovered as it added 257,000 more staffs to the Nov-21’s payroll.
• BoE projected the current inflation rate range of 5% will sustain along the 1Q22 with a possibility of peaking at 6% YoY by Apr-22.
Domestic Market Update
• The 10-year Indo GB yield jumped 6 bps to a level of 6.45% on Thursday (12/16/21), exceeding our daily projection range of 6.30-6.40%.
• The value of IDR against USD weakened to IDR14,343/USD yesterday. While, 5-year Indo CDS dropped to 76.25 bps.
• We believe recent uptrend in Indo GB yield to be driven by negative sentiment came from the first case of Omicron in Indonesia.
• Besides that, foreign ownership of tradable government securities also continued to decline since the start of Dec-21. Foreign investors recorded a net sell of IDR22tn throughout Dec-21.
• Bank Indonesia (BI) left its 7-Day Reverse Repo Rate unchanged at 3.5% in line with the major forecast. The deposit and lending facility rates were also sustained at 2.75% and 4.25% consecutively.
• BI added that the underlying reason to cap these rates is to keep the exchange rate and financial stability amid low inflation outlook, further boosting the economic recovery.
• Looking ahead, BI projected the overall 2021’s economic growth to stay at 3.2%-4.0%.
Market Projection
• Given the recent development, we expect the 10-year Indo GB yield to move within range of 6.38-6.48% today.
• Attractive Indo GB series to be traded today: FR0081, FR0084, FR0086, FR0090, FR0071, FR0078, FR0082, FR0087, FR0091, FR0092.
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