Global Market Update
• Yields on UST note increased ahead of Fed’s two day policy meeting due on this week.
• The 10-year UST yield rose slightly and closed at 1.77% starting this week.
• After dipping in the red zone throughout yesterday’s trading period, Wall Street reversed and ending higher in the late session.
• DJI and S&P 500 rallied 0.29% and 0.28% respectively, while Nasdaq Composite lead all gain after jumping 0.63%.
• Market focus remain on monetary policy normalization amid heightened inflationary pressure.
• However approach taken by central banks vary across countries.
• The Fed is expected to aggressively tighten their monetary policy by rolling back the economic support and raise interest rates 4 times this year.
• Meanwhile China seems to loose their monetary policy by cutting interest rates.
• In the Japan, its CB (BoJ) keeps the interest rates low. BoJ Governor said that ultra-low environment is needed and should be maintained with eye on inflation risk.
Domestic Market Update
• The 10-year Indo GB yield closed at 6.40% on Monday (01/24/22) in line with our daily forecast range of 6.35-6.45%.
• The IDR value depreciated against USD and was closed at IDR 14,343/USD (vs IDR14,336/USD last week). • Risk premium slightly decreased with Indonesia’s 5-year CDS stood at 87.70 bps (vs 87.82 bps last week). • On the data front, Indonesia broad money (M2) supply was reported at IDR7,867tn in Dec-21 or increasing 13.9% YoY.
• Liquidity in the economy remain ample, banking credit started to gradually recover since 1H21, and money velocity has been accelerated triggering a higher inflation yet still benign.
Market Projection
• Government is scheduled to conduct sovereign sharia securities (SBSN) auction today with the indicative target set at IDR11tn.
• We believe the target remains achievable given the robust investor demand. However we expect shorter maturity SBSN will likely having higher demand amid monetary policy normalization as investors tend to shorten their duration.
• 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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