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17 Januari 2022

Fixed Income Report - January 17, 2022

Global Market Update

• The 10-year UST yield rose 9 bps to 1.79% last week on Friday (01/14/22). Yields on UST note increased 4-8 bps along the curve.
• US stock market closed varied. DJI declined 0.56%, while S&P and Nasdaq Composite each gained 0.08% and 0.59%.
• Market keep digesting on the earlier rate hikes by the Fed as soon as Mar-22.
• According to CME data on FFR futures, the probability of the Fed to raise interest rate on Mar-21 now stood at 92% vs 71% in the first week of Jan-22.
• The probability increased significantly after Fed’s officials hawkish stance is needed to fight against inflation.
• On the data front, US retail sales contracted 1.9% MoM on Dec-21, lower than previous month and consensus forecast at 0.2% MoM & 0.0% MoM respectively.
• US Michigan Consumer Sentiment also fell to 68.8 on Jan-22 based on preliminary readings, below previous month figure of 70.6 and lower than consensus forecast at 70.
• Elsewhere, Germany’s FY21 GDP reported growth of 2.7% YoY in line with market expectation.
• Meanwhile in China, trade balance surplus recorded at USD94.46bn in Dec-21 higher than expectation of USD73bn due to lower imports growth.

Domestic Market Update
• The 10-year Indo GB yield slipped 1 bps and was closed at 6.37% on Friday (01/14/22) in line with our daily forecast range of 6.30-6.40%.
• The IDR value slightly depreciated and closed at IDR14,296/USD (vs IDR14,295/USD on Thursday).
• Unlike the IDR value, Indonesia 5-year CDS rose to 84.07 bps higher than on the previous trading day of 80.40 bps.
• BI-PMI increased to 50.17% in 4Q21 from 48.75% in 3Q21. BI also expect Indonesia CPI to increase 0.58% MoM/2.20% YoY in Jan-22.

Market Projection
• BPS will announce Indonesia’s international trade data today, Indonesia trade balance is expected to record another surplus or USD3bn by Dec-21.
• Exports is projected to grow 40.39% YoY while imports increased 39.99% YoY in Dec-21
• Trade balance surplus is likely on the back of commodity price that remain high.
• 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: FR0090, FR0071, FR0078, FR0081, FR0082.

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