Global Market Update
• US stronger than expected 4Q21 GDP data has triggered UST yield to fall. The 10-year UST yield declined 7 bps to 1.80% on Thursday (01/27/22).
• However yield on 2-year UST note increased and now nearing 1.20%. The short term maturity bond yield keep hovering above 1% indicating that Fed soon to tighten its monetary policy.
• Chair Powell said on yesterday press conference that he believed there is quite a bit room for Fed to raise interest rate without hurting the labor market.
• After QE that is scheduled to end in early Mar-22 followed by rate hikes, the Fed also consider to reduce the balance sheet.
• US GDP expanded 6.9% QoQ in 4Q21, above consensus estimate at 5.5% QoQ and previous quarter growth of 2.3% QoQ indicating that economic recovery remained on track despite the spread of Omicron variant.
• US equity market closed lower despite stronger than expected economic data. DJI slightly unchanged, while S&P 500 and Nasdaq Composite dropped 0.54% dan 1.40% respectively.
• Global local currency government bond recorded an increase yesterday. The Japan 10-year GB yield is now nearing 0.20%.
Domestic Market Update
• The 10-year Indo GB yield inched up 4 bps to 6.44% on Thursday (01/27/22) in line with our daily forecast range of 6.35-6.45%.
• The IDR value depreciated against USD and was closed at IDR 14,386/USD (vs IDR14,353/USD on Wednesday).
• Risk premium rose with Indonesia’s 5-year CDS stood at 89.23 bps (vs 86.39 bps on Wednesday).
• Foreign investors booked net sell of IDR1.33tn in Indo GB market year to date.
• Outflows from Indo GB market is triggered by Fed’s hawkish stance in calibrating monetary policy.
• Indonesia’s CB governor Perry Warjiyo said domestic inflationary pressures could strengthen in the 3Q22.
• We agreed that throughout 2022, inflation to start rising gradually. However we foresee inflation to remain manageable within BI target, therefore monetary policy could still be directed to support economic recovery.
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: FR0070, FR0084, FR0086, FR0082, FR0091.
Disclaimer On
