Global Market Update
• The 10-year UST yield hit 1.90% last night before retreating to 1.84%. However the short term interest rate reflected on 2-year maturity note yield topping 1% and hovering around 1.04%.
• US stock edged lower with DJI dropped 0.96%; S&P 500 declined 0.97% and Nasdaq Composite was corrected 1.15%.
• Concern remained on inflation and Fed’s policy normalization that triggered government bond yield to spike globally.
• The 10-year Bund yield flipped into positive territory for the first time in the last 3 years. Meanwhile the 10-year JGB rose above 0.10%.
• On the data front, UK inflation rose to 5.4% YoY in Dec-21. Consumer price rose above market expectation of 5.2%. It was also higher than Nov-21 figure.
• In Canada, inflation rate hit 4.8% YoY in Dec-21, slightly above Nov-21 figure yet remained in line with consensus estimate.
• US housing starts were reported to reach 1.702mn in Dec-21, above previous month figure and market estimate at 1.678mn and 1.65mn respectively.
Domestic Market Update
• The 10-year Indo GB yield increased 3 bps to 6.41% on Wednesday (01/19/22) in line with our daily forecast range of 6.35-6.45%.
• The IDR value depreciated and closed at IDR14,363/USD (vs IDR14,336/USD on Monday).
• Risk premium started to decline. Indonesia’s 5-year CDS edged lower to 85.83 bps (vs 87.72 bps in the previous day).
• Government bond yield spikes globally has triggered domestic rupiah asset to follow the suit recently.
• Given the depreciation of rupiah and rising risk premium, domestic currency denominated government bond yield rose.
• Government to issue 6 series of sharia securities next week through auction. Indicative target set at IDR11tn. We expect the target is achievable on the back of robust demand from domestic investors.
Market Projection
• We expect Bank Indonesia to hold BI 7 Day Reverse Repo Rate at 3.5% given low inflationary pressures and stable rupiah.
• 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: FR0084, FR0086, FR0090, FR0064, FR0082, FR0087.
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