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12 Oktober 2021

Fixed Income Report - October 12, 2021

Global Market Update

• U.S. bond markets were closed on Monday (10/11/21) commemorating a Columbus Day.
• U.S. stock market slid to start the week with DJI dropped 0.72%; S&P 500 declined 0.69% and Nasdaq Composite downed 0.64%.
• The Germany Bund yields hit the highest level since May-21. This came along with market expectation of ECB to hike rate by the end of 2022.
• The chance of ECB to hike rate in September-22 stood at more than 70% compared to the 50% in the previous week.
• Meanwhile in China, the government bond yields jumped following the development of Evergrande and other China’s property developer missed on their interest payment.
• Evergrande seemed to miss its third round of bond payments. Also Modern Land and Sinic became the latest property developer to experience a delay in payment.
• President Xi Jinping is reported to start investigation inspections of financial institutions to see if private companies like Evergrande has too much exposure to the state-owned banks.
• Oil prices keep continue rising with the Brent crude futures topping USD82/bbl on the back of rising demand amid gradual lifting in production among OPEC+ countries.
• Soaring oil price has renewed worries on higher and persistent inflation that can cause earlier than expected rate hikes.

Domestic Market Update
• The 10-year Indo GB closed 1 bps higher to 6.23% to start this week. The benchmark yield was still in our forecast range of 6.20%-6.30%.
• The 5-year Indo CDS increased topping 95 bps on Monday (10/11/21). Rupiah appreciated against USD to IDR 14.208/USD.
• Bank Indonesia (BI) reported Indonesia retail sales in August-21 improved with +2.1% MoM/-2.1% YoY compared to the previous month with -5.0% MoM/-2.9% YoY.
• We expect Indonesia retail sales in September-21 will likely to continue to improve on the back of gradual easing in public activity and bouncing back consumer sentiment.

Market Projection
• Government will conduct auction for 7 series of government debt securities (GDS) today with the indicative target set at IDR8tn. We expect investors appetite to remain strong yet demanding a higher yield in primary market
• We expect the 10 year Indo GB yield to increase and tend to move within range of 6.20% - 6.30% today.
• Attractive Indo GB series to be traded today : FR0086, FR0090, FR0082, FR0087, FR0091, FR0068, FR0080, FR0072.

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