Global Market Update
• US financial market tumbled the day after Martin Luther King Jr holiday. UST yield spiked and equity market dropped.
• The 10-year UST yield rose 10 bps to 1.87% on Tuesday (01/18/22). The longer term 30-year UST note yield climbed nearly 8 bps to 2.19%.
• Meanwhile the shorter interest rates indicated by 2-year UST yield topping 1%. Yields have risen 6-10 bps along the curve to start this week.
• Rising yields in US government bond triggered sell off in equity market. DJI declined 1.51%; S&P 500 dropped 1.84% and Nasdaq Composite was corrected 2.60%.
• Market participant keep an eye on Fed’s policy meeting for Jan-22. Last week Fed’s Chair Powell said that central bank sees a series of interest rate hikes this year along with a pullback in pandemic support measures.
• Inflation is running hot in US and seems to be more persistent than initially thought.
• Now market participants have anticipated earlier rate hike as soon as Mar-22.
Domestic Market Update
• The 10-year Indo GB yield slightly increased to 6.38% on Tuesday (01/17/22) in line with our daily forecast range of 6.35-6.45%.
• The IDR value depreciated and closed at IDR14,336/USD (vs IDR14,318/USD on Monday).
• Risk premium continued to uptrend. Indonesia’s 5-year CDS rose to 87.72 bps and higher than on the previous trading day of 87.25 bps.
• Government of Indonesia successfully raised funding of IDR25tn from yesterday's securities auction. The total incoming bids were IDR84.84tn.
• The total incoming bids increased from the previous auction on Jan.4, 2022 that were recorded at IDR77.58tn.
Investors demand for fixed income instrument remained robust as we have expected before.
• The preference for maturity has also shifted towards shorter duration as it can be seen that demand for bills (SPN03220420 and SPN12230105) were cumulatively the highest in yesterday's auction contributing 38.73% of all the incoming bids.
Market Projection
• Given the recent development, we expect the 10-year Indo GB yield to increase and move within range of 6.35-6.45% today.
• Attractive Indo GB series to be traded today: FR0046, FR0070, FR0090, FR0071 and FR0052.
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