Global Market Update
• 10 year U.S. treasury yield closed higher to 1.29% in July 26, 2021 ahead of the Fed FOMC policy meeting that is due to begin on Tuesday (07/27/21).
• The Fed is expected to stay on its accommodative stance despite higher inflationary pressure lingers. Rising Covid-19 infection associated with widespread of Delta variant posing a downside risk for U.S. economic recovery momentum.
• U.S. new home sales dropped 6.6% MoM in June-21, slightly better than previous month (-7.8% MoM) but weaker than consensus estimate (+3.5% MoM).
• Stronger than expected second-quarter reporting season has bolstered U.S. equity market. Last night DJI closed 0.24% higher. Meanwhile S&P 500 and Nasdaq Composite added 0.24% and 0.03% respectively.
• According to FactSet, 88% of S&P 500 companies have reported higher positive EPS.
Domestic Market Update
• Domestic bond market closed flat yesterday. ICBI settled at 322.48. 10 Year Indo GB yield rose 1 bps to 6.31% or 3 bps higher than -1STD of its fair yield.
• Rupiah appreciated against USD to 14,483/USD yesterday, while Indonesia risk premium increased to 80 bps at the same period. U.S.-Indo spread was relatively stable at 500 bps.
• Liquidity in the economy remained ample as indicated by money supply (M2) which grew 11.4% YoY in June-21. However we believe money velocity to stay low due to the extended social restriction measures. Therefore inflationary pressure to be steadily low. We see Indo GB offers attractive valuation in terms of real yield amid low yield environment globally.
Market Projection
• We expect market to consolidate for today’s trading activity. 10 year Indo GB yield will likely to move within range of 6.29-6.33%.
• We see FR0086, FR0087, FR0083 an FR0092 are attractive for trading purpose.
• We are optimistic that government will likely to reach its indicative target of IDR12tn from 6 series of Islamic debt securities auction today on the back of investors appetite toward domestic fixed income instruments that remain high.
Disclaimer
