Global Market Update
• As Russia and Ukraine conflict escalates, demand for safe haven asset rise.
• After Russia attacking Ukraine territory, oil price surged with Brent topping USD100/bbl.
• Gold that is known as inflation hedge instrument and also another safe haven asset also rose to above USD1,900/t oz yesterday.
• Heightened geopolitical tensions may further to complicate inflation outlook. Higher oil price could translate to higher inflation.
• Responding to the invasion, US expanded sanctions against Russian banks and financial elites on Thursday.
• Following the military operations and all the sanctions imposed to Russia, its benchmark 10-year government bond yield jumped more than 12%, the highest in the last 5 years.
• Meanwhile another safe haven asset such as US government bond recorded a decline of 1-8 bps along the curve.
• The benchmark 10-year UST yield dropped 3 bps to 1.96% on Thursday (02/24/22).
• Despite the geopolitical risk that is rising, US equity market rebounded. DJI rose 0.28%; S&P 500 increased 1.49% and Nasdaq Composite jumped 3.34%.
Domestic Market Update
• Russia-Ukraine conflict has triggered domestic equity market to fall. Meanwhile the government bond market still showed a limited move on Thursday (02/24/22).
• JCI fell 1.48% yesterday. The benchmark 10-year Indo GB yield rose 2 bps to 6.51% while 5-year Indo GB yield rose 1 bps to 5.34%.
• The IDR value weakened against USD to the level of IDR14,391/USD yesterday (vs IDR14,338/USD on the previous day).
• Meanwhile risk premium also increase almost 10 bps to 108.13 bps from 98.89 bps previously.
• The government will conduct a private placement transaction for Government Securities (SUN) for the purpose of placing funds for the Taxpayer's Voluntary Disclosure Program.
• Series in this transaction are FR0094 (new issuance) for a 6-year tenor with a 5.6% coupon and USDFR0003 (new issuance) for a 10-year tenor with a 3.0% coupon.
• We view that apart from obtaining an alternative financing, this Taxpayer Voluntary Disclosure Program will also strengthen the domestic government bond market.
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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