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Company Update

16 November 2021

Fixed Income Report - November 16, 2021

Global Market Update

• The 10-year U.S. treasury yield edged up 5 bps to 1.62% on Monday (11/15/21). U.S. treasury yields rose 1-6 bps along the curve.
• U.S. stocks market closed mixed last night. Both DJI and Nasdaq Composite slipped -0.04%, while S&P 500 remained unchanged.
• Joe Biden finally signed USD1 tn infrastructure bill into law yesterday. More than half of the budget will be allocated to transportations, broadband and utilities. The remaining then will be invested in public transit systems, roads and passenger rail.
• Canada reported a fall in monthly manufacturing sales to -3% MoM in Sep-21, lower compared to the Aug-21 figure. Shortage in semiconductor chips was one of the primary factors that boosted this decline to occur across 12 of 21 industries.
• Eurozone’s trade surplus accelerated to a level of EUR7.33 bn in Sep-21, significantly higher than the previous period’s at EUR3.53 bn.
• China’s industrial production rate hiked to 3.5% YoY in Oct-21, surpassed the consensus at 3%. Communication and energy production noted as industries with the highest output growth.
• A growth also recorded in China’s retail sales to 4.9% YoY in Oct-21, slightly above the Sep-21 figure of 4.4%. Arising sales and consumption were attributable to the decline of Covid-19 cases in several provinces.

Domestic Market Update
• The 10-year rupiah denominated government bond yield fell 2 bps to 6.02% to start this week (11/15/21). This is in line with our daily forecast range of 6.00%-6.10%.
• Lack of external pressure has boosted Indo GB price. Based on our model, the 10- year Indo GB yield was 10 bps lower than its -1STD fair yield.
• We noted the spread between 10-year Indo GB and 10-year U.S. treasury yield remained stable below 500 bps since 4Q21 started.
• The value of rupiah strengthened against at USD to IDR 14,213/USD on Monday (11/15/21). Meanwhile 5-year Indo CDS dropped to 83.74 bps at the same time.
• Indonesia trade balance recorded a surplus of USD5.73bn in Oct-21 driven by higher export values (+53.35% YoY) than imports (+51.06% YoY).

• Trade balance surplus should support rupiah stability. Given the stable rupiah, the risk for investing in domestic currency government bond should be minimum.

Market Projection
• Given the rise in U.S. treasury yield we expect the 10-year Indo GB yield to rise. However with the strengthening rupiah a limited move is likely and maintain our daily forecast range for 10-year Indo GB yield at 6.00-6.10% today.
• Attractive Indo GB series to be traded today : FR0086, FR0090, FR0071, FR0078, FR0087, FR0091, FR0068, FR0088, FR0083 and FR0092.

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