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10 Januari 2022

Fixed Income Report - January 10, 2022

Global Market Update

• In the first week of Jan-22, yields in the benchmark government bond increased globally.
• The U.S. treasury yields for longer maturity rose 2-3 bps along the curve, while the benchmark 10-year U.S. treasury note yield was up 4 bps to 1.76% on Friday (01/07/21).
• The Spikes in U.S. treasury yields also jitter U.S. stock market. All 3 benchmark equity index dipped in red last week ( DJI -0.01%; S&P 500 -0.41%; Nasdaq Composite - 0.96%).
• Despite the disappointing equity performance in the U.S., global equity market recorded a massive fund flow of USD19bn from Jan 1-5, 2022.
• According to Reuters report, U.S. equity funds attracted USD8.98bn in the week to Jan 5, while European and Asian equity funds drew USD7.25bn and USD0.43bn respectively.
• Markets keep reacting on the possibility of earlier FFR hikes as soon as Mar-22 as said by the Fed’s St Louis James Bullard.
• On the data front, Dec-21 Non-Farm Payrolls (NFP) grew by 199k, significantly lower than consensus forecast at 422k.
• However, the U.S. job market keep strengthening as reflected on its unemployment rate figure.
• The U.S. Dec-21 unemployment rate fell to 3.9%, below market expectation at 4.1% and marking the lowest level since Feb-21.

Domestic Market Update
• The 10 year Indo GB yield increased 5 bps at 6.44% on Friday (01/07/22) in line with our daily forecast range of 6.35-6.45%.
• Unlike in the previous trading days, rupiah started to strengthened and risk premium decreased.
• The rupiah value increased to IDR14,358/USD on Friday (vs IDR14,393/USD on Thursday), while 5-year Indo CDS declined to 77.39 bps (vs 78.79 bps in the previous day).
• The rise in government bond yield was in line with the global sentiment flooded with Fed’s hawkish stance to fight inflation.
• On the data front, Bank Indonesia (BI) reported Indonesia’s FX reserves position in Dec-21 stood at USD144.9bn or USD1bn lower then previous month.
• The decline in FX reserves in Dec-21 was influenced, amongst others, by the need of government's external debt payment.

Market Projection
• Given the recent development, we expect the 10-year Indo GB yield to move 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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