Global Market Update
• The 10-year U.S. treasury yield strengthened to its highest level since mid-May topping 1.67% on Wednesday (20/10/21).
• U.S. stock market closed mixed last night with DJI and S&P 500 jumped 0.43% and 0.37% respectively, while Nasdaq dropped 0.05%.
• The Fed Officials agreed to start the tapering on the middle of November or December 2021 through monthly reductions of asset purchases by USD15bn.
• Japan reported a trade deficit of JPY622.76bn last month, higher than the market consensus of JPY519.2bn.
• The People’s Bank of China (PBoC) decided to maintain its one- and five-year loan prime rate at 3.85% and 4.65% respectively.
• The UK September CPI was at 3,1% lower than the consensus estimate and previous month’s at 3.2%
• Canada inflation rate reached its 18-year high at 4.4% in September 2021, higher by 0.1% than the market forecast. High inflation rate was attributable to supply chain issue and low base effects.
Domestic Market Update
• Domestic financial market was closed yesterday commemorating Mawlid al-Nabi.
• The 10-year Indo GB closed flat to 6.07% on Tuesday (10/19/21). The benchmark yield was still below our forecast range of 6.10%-6.20%.
• Despite rising U.S. treasury yield recently, the benchmark of local currency denominated government bond stayed low on the back of rupiah stability.
• Rupiah came back and strengthened against USD to IDR 14.076/USD on Wednesday. In line with rupiah appreciation, Indo 5-year CDS also dropped to 84 bps.
• Government successfully raised IDR5tn from Sharia Securities (SBSN) auction on Tuesday (10/19/21). Investors appetite remained high as reflected by total incoming bids that hit above IDR53.42tn amid lower supply of government bond ahead in the primary market.
• As we already expected, Bank Indonesia (BI) decided to keep interest rate unchanged with BI 7 Day Reverse Repo at 3.50%; Lending Facility at 4.25% and Deposit Facility at 2.75%.
• However BI continues its accommodative macroprudential policy by extending 0% Down Payment (DP) for vehicle ownership credit and maximum 100% Loan to Value/Financing to Value all mortgage loans for selected banks that meet NPL/NPF criteria up until the end of 2022.
Market Projection
• We expect the 10 year Indo GB yield to consolidate and moving within range of 6.10% - 6.20% today.
• Attractive Indo GB series to be traded today : FR0086, FR0090, FR0064, FR0071, FR0078, FR0087, FR0091, FR0062 and FR0092.
Disclaimer
