Global Market Update
• Yields on government bond in developed market closed lower on Friday (02/18/22).
• Investors focus remained on the development of Russia-Ukraine crises with US officials expect Russia to attack Ukraine in a few days.
• In response to the heightened geopolitical tensions, US President Joe Biden is expected to move more US troops closer to Ukraine.
• Yields on US government bond declined 2-7 bps along the curve. The benchmark 10-year UST yield slipped 3 bps to 1.93%.
• In Germany and UK, their 10-year benchmark government bond yield fell 8 bps and 4 bps respectively on day to day basis.
• Given the recent heightened geopolitical risk, riskier assets such as stocks and cryptocurrencies were experiencing a selloff, while gold price rose by 2% on a weekly basis.
• Wall Street dipped in red last week. DJI dropped 0.68%; S&P 500 fell 0.72% and Nasdaq Composite came at the worst after being corrected by 1.23%.
• Fed’s monetary policy is also being closely monitored with the recent debate on should US central bank take a big step to hike interest rate.
• Based on FFR futures contract, market expect the Fed to increase interest rate by 25 bps with probability of 86.7%.
Domestic Market Update
• Majority of domestic government bond yields were slightly lower on Friday (02/18/22).
• The benchmark 10-year Indo GB yield edged 1 bps lower to 6.49% while 5- year Indo GB yield stayed at 5.31% at the same time.
• The IDR value depreciated against USD and was closed at IDR 14,328/USD on Friday (vs IDR 14,318/USD in the previous day).
• Furthermore, country’s risk premium also increased. The 5-year Indo CDS slightly increased to 98.02 bps.
• During period of February 14-17 Indonesia recorded a foreign inflows amounting to IDR10.81tn including IDR7.82tn in equity market and IDR2.99tn in government bonds according to Bank Indonesia.
• Foreign inflows continued despite Fed tightening agenda which we believe to reflect investors confidence to Indonesia on the back of more resilient economy and attractive financial asset valuation.
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, FR0078, FR0052, FR0054 and FR0091.
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