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14 Januari 2022

Fixed Income Report - January 14, 2022

Global Market Update

• The UST yield continued to trade lower on Thursday (01/14/22). Trend in 10- year benchmark UST note yield dropped 5 bps to 1.70%.
• However, the decline of UST yields is expected to be temporary and going forward the 10-year benchmark rate is expected to hit 2%.
• For the long maturity US treasury note, yields closed lower, while yield on short term maturity and belly are was up.
• From the equity market, 3 US stock index dipped in red. Dow Jones slid 0.49% while S&P 500 and Nasdaq Composite dropped 1.42% and 2.51%.
• The drop in stock prices particularly tech sector is more affected by UST yield change.
• Despite the stock prices decline, analysts expect bottom line of stock issuers to grow 22% in 4Q21. Earnings for FY21E was projected to grow by 50% yoy.
• On the data front, US reported weekly jobless claims at 230 thousands came above market expectation at 200 thousands.

Domestic Market Update
• The 10-year Indo GB yield slipped 1 bps and was closed at 6.38% on Thursday (01/13/22) in line with our daily forecast range of 6.35-6.45%.
• The IDR value slightly appreciated and closed at IDR14,3295/USD (vs IDR14,1/USD on Wednesday).
• Unlike the IDR value, Indonesia 5-year CDS rose to 80.40 bps higher than on the previous trading day.

• Government of Indonesia plan to issue government bond next week with the target value of IDR25-37.5tn.
• We believe that government could achieve its funding target as demand for government bond remain robust.
• In the previous auction Jan.4, 2021, the total incoming bids were at IDR77.58tn while the awarded value at IDR25tn.
• We think that government will use front loading approach as FFR hikes is likely in the 2H22.
• However with the outlook of budget deficit to be lower than the target, risk on government bond supply could be reduced and thus limit the yield spike in domestic bond market.

Market Projection
• Given the recent development, we expect the 10-year Indo GB yield to move within range of 6.30-6.40% today.
• Attractive Indo GB series to be traded today: FR0090, FR0071, FR0052, FR0091, FR0068, FR0080, FR0072.

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