Global Market Update
• Tensions between Russia and Ukraine remained high and investors are flocking to safe haven asset causing yield on global sovereign bond to fall.
• Ukrainians still try to defend its capital Kyiv despite Russian efforts to overtake the city.
• Fed’s Chair Powell said US central bank will go ahead with the plan to increase interest rate although he also warned that geopolitical tension bring another uncertainties.
• Furthermore, Powell said Russia-Ukraine conflict could affect US economy across a variety channels from higher prices to dampened spending and investments.
• On the commodity market, oil and gold price remained elevated. Brent crude future hovered around its 7-year highs while gold surpassing US$ 1,925/troy ounce.
• Equity market was highly volatile. US stock market fell on Wednesday (03/03/22). Nasdaq Composite came at worst with 1.56% drop last night.
• It is unknown whether Russia will take a full assault against Ukraine to takeover the capital city.
• However, with the continues escalation in conflict, NATO’s countries decided to impose economic sanctions to Russian economy.
• With the recent move from western nations, Moody’s Investors Service and Fitch Ratings have downgraded Russia’s credit rating into junk territory.
Domestic Market Update
• Following the recent worsening in global sentiment, domestic government bond prices recorded a decline.
• The benchmark 5-year Indo GB yield rose 5 bps to 5.39% and its 10-year Indo GB yield jumped 4 bps to 6.55% on Wednesday (03/02/22).
• The IDR value weakened against USD to the level of IDR14,394/USD on Wednesday (vs IDR14,335/USD previous day).
• Risk premium which is reflected by the 5-year Indo CDS still hovering above 110 bps.
• Retail Sukuk offering period of SR016 starts on February 25 - March 17, 2022.
• SR016 has a maturity of 3 years with an annual rate of return of 4.95% and it is tradable between domestic investors starting from June 11, 2022.
• SR016 is the second type of retail SBN issued by the government this year out of a planned 7 types of retail SBN with a total funding target of IDR 100 trillion by 2022.
• We remain optimistic that the government will be successful in issuing SR016 if we look at the previous issuance of retail SBN, namely ORI021 with a total issuance volume reached Rp25.07 trillion in line with the strengthening of the domestic investor base.
Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move up within a range of 6.50-6.60% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0086, FR0090, FR0052 and FR0087.
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