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24 Januari 2022

Fixed Income Report - January 24, 2022

Global Market Update

• Yields on UST note finally retreated on Friday (01/21/22). The 10-year UST yield dropped 5 bps from the previous trading day to 1.76%. UST notes yield edged lower by 2-8 bps along the curve.
• Despite the decline in bond yields, US equities continued to fall. DJI dropped 1.30%; S&P 500 fell 1.89% and Nasdaq Composite tumbled 2.72% last week.
• The Fed is scheduled to hold a meeting on Jan 25-26 and is expected to set a stage for interest rate hikes. • With the decline in UST yield, global benchmark government bond also saw and easing pressure.
• The 10-year Bund yield flipped to negative territory again after previously hitting a positive yield.
• The Bank of Japan (BoJ) left its key short-term interest rate unchanged at - 0.1% and that for 10-year bond yields around 0% during its January meeting.
• However BoJ saw that inflation risk is rising. Japan’s central bank forecasts inflation to reach 1.1% for FY22.

Domestic Market Update
• The 10-year Indo GB yield increased 1 bps to 6.45% on Friday (01/21/22) in line with our daily forecast range of 6.35-6.45%.
• The IDR value against USD was closed at IDR 14,336/USD in the last trading day last week.
• Risk premium increased with Indonesia’s 5-year CDS rose to 87.82 bps (vs 86.04 bps in the previous trading day).
• On the data front, Indonesia's banking loan disbursement grew 5.20% in FY21 in line with CB expectation of 4-6% growth. Loan growth is expected to reach 8.7% FY22F.
• Despite gradual liquidity normalization enacted by BI through increasing reserve requirement for commercial & sharia banks started from Mar-22, we believe that banking credit will not significantly impacted since the industry remain having ample liquidity.

Market Projection
• 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, FR0082, FR0087

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