Company Update

14 Februari 2022

Fixed Income Report - February 14, 2022

Global Market Update

• UST yields retreated in the last day of trading last week. Yields fell 6-12 bps along the curve with the 2-year UST yield at 1.50% (-11bps) and benchmark 10-year UST yield at 1.94% (-10 bps).
• Lowering the US government bond yield came after US National Security Advisor warned that there were signs of possibilities Russia to invade Ukraine.
• Previously UST yields jumped after inflation in US rose to a 4 decades high of 7.50% YoY in Jan-22.
• Given the rise in UST yields, market started to anticipate an aggressive move by the Fed in tightening monetary policy.
• Based on CME Futures data, the Fed is expected to hike FFR by 50 bps in Mar-22 with the probability of more than 80%.
• On the other hand, US Michigan consumer sentiment fell to 61.7 in Feb-22 (vs 67.2 in Jan-22) based on preliminary readings.
• The figure or weakening US consumer sentiment was below market forecast of 67.5 and primarily due to rising inflation that deteriorate personal finance.
• US equity market dropped with DJI fell 1.43%; S&P 500 declined 1.90% and Nasdaq Composite decreased 2.78% in the last day of trading last week.


Domestic Market Update
• The 10-year Indo GB yield was up by 2 bps to 6.50% on Friday (02/11/22) in line with our daily forecast range of 6.45-6.55%.
• Declining benchmark government bond yield was attributable to : 1) rising UST yield; 2) IDR depreciation and 3) rising risk premium.
• The IDR value depreciated against USD and was closed at IDR 14,353/USD on Friday (vs IDR14,343/USD in the previous day).
• Meanwhile risk premium also rose, reflected by 5 year Indo CDS that stood at 95.79 bps last week (vs 91.29 bps in the previous day).
• Albeit the recent spread of Omicron variant that trigger 3 rd wave outbreak, Indonesia consumer sentiment remained optimistic.
• Indonesia Consumer Confidence Index (CCI) strengthened 1.3 points to 119.6 in Jan-22 from 118.3 in Dec-21.
• Higher CCI was observed across most spending and age brackets. We believe this could be a key positive catalyst for Indonesia's economy to continue its recovery.


Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 6.45-6.55% for today.
• Attractive Indo GB series to be traded today: FR0070, FR0090, FR0071, FR0052 and FR0091.


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