Global Market Update
• The 10-year UST yield rose to 1.78% on Tuesday (01/26/22). Yields on shorter maturity note increased higher than longer maturity.
• Overall yields on UST note rose 2-7 bps along the curve yesterday ahead of Fed’s FOMC meeting.
• The Fed is expected to hold benchmark policy rate at current level with FFR target 0-25 bps.
• However, there is a significant probability that US central bank will raise 25 bps as soon as Mar-22 with more than 80% possibility.
• Market keep eyes on Fed’s chair Powell statement to bring forward guidance on policy rate.
• Rising the short term UST note yield (2-year) topping 1% indicated that the Fed will be more aggressive in tightening its policy to control inflation.
• US equity market tumbled last night with DJI downed 0.19%; S&P 500 declined 1.22% and Nasdaq Composite retreated 2.28%.
Domestic Market Update
• The 10-year Indo GB yield closed lower at 6.39% on Tuesday (01/25/22) in line with our daily forecast range of 6.35-6.45%.
• The IDR value depreciated against USD and was closed at IDR 14,351/USD (vs IDR14,343/USD on Monday).
• Risk premium increased with Indonesia’s 5-year CDS stood at 89.49 bps (vs 87.70 bps on Monday).
• Government successfully issued sharia securities for budget financing on Tuesday (01/25/22). Total fund raised were IDR11tn, while the incoming bids value were IDR38.29tn.
• Despite the success in sharia securities issuance, incoming bids value was lower than in the previous auction of IDR55.35tn on Jan.11, 2022.
• Furthermore, investors' appetite for shorter maturity fixed income asset was reflected by incoming bids value of sharia bill (SPNS12072022) which totaled IDR12.83tn.
• In our view, lower incoming bids and higher demand for shorter yielding asset was driven by external factor primarily rising interest rate risk.
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: FR0081, FR0084, FR0086, FR0071, FR0082.
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