Global Market Update
• U.S. treasury yield climbed 2-5 bps along the curve on Thursday (01/06/22). The 10- year U.S. treasury note yield rose 1 bps to 1.71%.
• Markets keep digesting on the U.S. central bank’s plan to normalize its balance sheet.
• Majority of local currency denominated government bond edged up globally, bringing the rates to a multi-month highs.
• The ISM Services PMI in the U.S. fell to 62 in Dec-21 from a record high of 69.1 in Nov-21, well below market forecasts of 66.9. but still pointing to the 19th consecutive month of expansion.
• U.S. stock market fell with DJI dropped 0.47% while S&P 500 and Nasdaq Composite slipped 0.10% and 0.13% respectively.
• Hawkish Fed and German inflation pushed 10-year Bund yield up closer to 0%.
• According to Germany’s Federal Statistical Office, CPI rose 5.3% YoY in Dec-21, slightly above previous month and consensus forecast figure at 5.2% YoY.
• In addition, Eurostat reported that Producer Price Index (PPI) in EA rose 23.7% YoY in Nov-21. The figure was above previous month and consensus forecast at 21.9% YoY and 22.9% respectively.
• The EA’s PPI now hit an all time high since the first reported in the last 4 decades.
• Global Covid-19 cases keep continue rising. As of Jan 3, the daily Covid-19 infection has hit 2.5mn cases reaching an all time high since the start of the pandemic.
• Surging Covid-19 cases recently was attributable to the spread of Omicron variant that has been found in more than 110 countries now.
Domestic Market Update
• The 10 year Indo GB yield closed at 6.39% on Thursday (01/05/22) in line with our daily forecast range of 6.30-6.40%.
• The move in benchmark Indo GB yield was also followed by IDR depreciation and rising risk premium.
• The IDR depreciated against USD and closed at IDR14,393/USD yesterday (vs IDR14,358/USD on Wednesday).
• Meanwhile the 5-year Indo CDS nudged up to 79.6 bps (vs 73.4 bps in the previous day).
• From the equity market, JCI also dipped 0.13% to 6,653.35 yesterday. We think this was attributable to the Fed’s more hawkish stance in fighting persistently high inflation as shown in FOMC’s minutes of meeting. • MoF reported government revenue (IDR2,003tn/114.9%) and spending (IDR2,878.7tn/) hit more than 100% target of APBN 2021 bringing budget deficit to IDR783.7tn.
Market Projection
• Given the recent development, we expect the 10-year Indo GB yield to increase within range of 6.35-6.45% today.
• Attractive Indo GB series to be traded today: FR0081, FR0084, FR0086, FR0090, FR0071, FR0078
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