Global Market Update
• UST yields were little changed on Monday (02/07/22). Yields slightly decreased 1-2 bps along the curve.
• The 10-year UST yield closed at 1.92% while the 2-year UST yield closed at 1.31%.
• Key data to be closely watched later this week include inflation on Thursday and consumer sentiment on Friday.
• Consensus projected US CPI to rise 7.3% YoY in Jan-22, the highest rate in the last decade.
• US equity market fell with S&P 500 dropped 0.37% and Nasdaq Composite declined 0.58%.
• The high probability of policy rate hike taken by major central bank has made government bond yield to increase.
• Germany 10-year benchmark yield was consistently in the positive territory since Feb-22.
• Elsewhere, Japan 10-year benchmark yield was nearing 6 year high albeit slightly dovish BoJ.
Domestic Market Update
• The 10-year Indo GB yield increased 3 bps to 6.48% on Monday (02/07/22) in line with our daily forecast range of 6.40-6.50%.
• The increase in government bond yield was attributable to rising UST yield, IDR depreciation and rising risk premium. However the increase in yield remain manageable.
• The IDR value depreciated against USD and was closed at IDR 14,397/USD (vs IDR14,380/USD in the previous day).
• Risk premium also increased with Indonesia’s 5-year CDS stood at 96.15 bps (vs 97.15 bps previously).
• Statistic Indonesia reported Indonesia GDP grew 5.02% YoY in 4Q21 and 3.69% YoY in FY21, slightly in line with our expectation at 5.11% YoY in 4Q21 and 3.71% YoY in FY21.
• Government decided to tighten PPKM leveling in Jabodetabek as the Covid-19 cases increased significantly.
Market Projection
• Government is scheduled to conduct sharia securities auction today with the indicative target set at IDR11tn.
• We see demand for fixed income instrument to remain high thus we believe the target is achievable.
• However due to recent rise in yield, demand for shorter maturity asset to increase.
• Given the increase in UST yield and risk premium as well as IDR depreciation we see that yields on domestic currency denominated bond would likely to rise.
• We expect the 10-year Indo GB yield to move within range of 6.40-6.50% today.
• Attractive Indo GB series to be traded today: FR0070, FR0084, FR0086, FR0082, FR0091
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