Global Market Update
• The 10-year U.S. treasury yield climbed 3 bps to 1.43% on Monday (12/20/21). U.S. treasury yields varied with short and belly tenors declined 1-2 bps along the curve, while long-end yields inched up 2-3 bps.
• U.S. stocks market closed weaker last night with DJI fell 1.23%, S&P 500 was down 1.14% and Nasdaq Composite lost 1.24%.
• Economists expected a slower U.S. economic growth may occur next year as Covid-19 Omicron variant infection rates surge.
• The head of WHO Tedros Adhanom yesterday confirmed that Omicron’s transmission is significantly faster than Delta variant as data further reported the new variant has now spread to 89 countries where its rate is doubling in 1.5 to 3 days.
• Netherlands became the first EU country to impose nationwide lockdown until at least 14 January while Germany started to ban travellers from the U.K as a response. Despite about 90,000 new cases reported daily, the U.K. has not yet announced any plan in tightening its social measures.
• China’s 1-year loan prime rate (LPR) was cut to 3.8% in Dec-21, a 5 bps lower than the previous month’s figure at 3.85% while its 5-year LPR stuck at 4.65%.
• This cut was the first since Apr-20 with hope that new benchmark lending rate can aid the slowing economy resulted from heightening pressures from Coronavirus pandemic and domestic property debt.
Domestic Market Update
• The 10-year Indo GB slipped 3 bps to 6.39% on Monday (12/20/21), well aligned with our daily forecast range of 6.38-6.48%.
• The value of IDR against USD weakened to a level of IDR14,378/USD yesterday. Meanwhile, 5-year Indo CDS hiked to 78.19 bps.
• Recent rupiah depreciation was also attributable to weakening sentiment on the backdrop of Omicron spread and also outflows from domestic financial market both from equity and government bond.
• Government will issued bond with the value of IDR157tn in the end of 2021 that will be bought by Bank Indonesia (BI) under SKB III. In 2022, BI will still buy government bond worth of IDR224tn under SKB III.
• We believe with the implementation of SKB III will help government to reduce the value of domestic securities issuance, therefore also reducing supply risk.
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.
Disclaimer
