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18 Januari 2022

Fixed Income Report - January 18, 2022

Global Market Update

• Global government bond yields slightly increased yesterday. Market remained focus on the Fed’s rate hike that is expected as soon as Mar-22.
• US stock and bond market were closed on Monday (01/17/22) commemorating Martin Luther King Jr. Day. • Last week the 10 year UST yield closed at 1.79%. US market will reopen Tuesday (01/18/22).
• On the data front, NBS reported China’s GDP expanded 4% YoY in 4Q21, higher than consensus estimate of 3.6% YoY but lower than previous quarter growth of 4.9% YoY.
• China’s industrial production grew 4.3% YoY in Dec-21, higher than previous month figure of 3.8% YoY and consensus estimate 3.6% YoY.
• However China’s retail sales decelerated to 1.7% YoY, lower than previous month of 3.9% YoY and consensus forecast of 3.7% YoY.

Domestic Market Update
• The 10-year Indo GB yield was flat and stayed at 6.37% on Monday (01/17/22) in line with our daily forecast range of 6.35-6.45%.
• The IDR value depreciated and closed at IDR14,318/USD (vs IDR14,296/USD on Thursday).
• Risk premium continued to uptrend. Indonesia’s 5-year CDS rose to 87.25 bps and higher than on the previous trading day of 84.07 bps.
• On the data front, Statistics Indonesia reported exports jumped 35.30% YoY (vs consensus: 40.4% YoY) and imports rose 47.93% YoY (vs consensus : 39.4% YoY) in Dec-21.
• As a consequence of lower than expected exports yet higher than anticipated imports, Indonesia’s trade balance surplus was lower than consensus estimate.
• Indonesia’s Dec-21 trade balance stood at USD1.02bn or lower than market expectation at USD3.13bn.

Market Projection
• Government will issue 7 series of securities including 2 bills and 5 notes through auction today. The indicative target set by government at IDR25-37.5tn.
• We foresee that demand for government securities will remain robust from investors.
• The incoming bids are likely to hit at least IDR50tn. Therefore the target set by government is achievable despite the recent trend in rising yield globally.
• We expect demand for shorter maturity government bond will be higher in the midst of monetary tightening cycle.
• 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, FR0052, FR0082.

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