Global Market Update
• The 10-year U.S. treasury yield fell 1 bps to 1.40% on Friday (12/17/21). U.S. treasury yields rose 1-2 bps along the short-end tenor, while belly- and long-end yields slipped 1-5 bps along the curve.
• U.S. stocks market lost last Friday with DJI significantly dropped 1.48%, S&P 500 followed by tumbling 1.03% while Nasdaq Composite slid 0.07%.
• Both the Fed’s decision to normalize its monetary policy faster combined with a rapid spread of Omicron variant remained as focus weighing on the market sentiment.
• Despite that, major economies still indicate different stage of urgency in tightening their monetary policy. For example, the U.K, Sweden and New Zealand have been reported their interest hikes in the end of 2021 ahead of many.
• On the other hand, the U.S. and Canada are expected to raise their interest rates soon following the end of their bond-buying program in Mar-22 and Oct-22. Meanwhile, Australia, Euro Zone and Japan were at the back of the queue in leaving their ultra-easy policy.
Domestic Market Update
• The 10-year Indo GB edged down 1 bps to 6.42% on Friday (12/17/21), still in line with our daily projection range of 6.38-6.48%.
• The value of IDR against USD depreciated to IDR14,368/USD last Friday. Meanwhile, 5-year Indo CDS inched up to a level of 76.28 bps.
• Throughout Dec-21, the average value of Jakarta Interbank Spot Dollar Rate (JISDOR) was at IDR14,368/USD. The domestic currency has depreciated 0.68% against USD from Nov-21 average.
• On top of wider Omicron spread and possible rates hikes next year, the weakening IDR value was aligned with outflows of more than IDR20tn from government bond and equity market.
• We further consider the depreciation to stay low and foresee the value of IDR to be at IDR14,325/USD as of end 2021.
• Bank Indonesia (BI) reported a slower growth rate in demand for corporate financing at 14.8% in Nov-21, falling from 16.7% shown in net weighted balance figures. At the same period, demand for household funding remained limited.
• On the other end, supply for new credit rose in Nov-21 throughout all bank category boosted by the increasing use of working capital loan.
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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