Global Market Update
• The 10-year U.S. treasury yield lowered to level 1.62% on Tuesday (26/10/21). Despite a slight rise in short-end and belly, the long-term treasury yields fell by 1- 4 bps.
• The U.S. stock market closed at gain last night. DJI, S&P 500 and Nasdaq Composite climbed 0.04%, 0.18% and 0.06% respectively.
• The U.S. reported a rise in new home sales by 14% MoM to a seasonally adjusted annual rate of 800K in Sep-21, higher than the market consensus of 760K.
• The U.S. Conference Board (CB) Consumer Confidence increased by 4.5 points to a level of 113.8 in Oct-21. This figure was higher than the market estimate at 108.3.
• Solid economic data supported the idea that The Fed is likely to normalize their monetary policy earlier than the expected.
• EU’s inflation expectation hit a new seven-year high above 2.07%, higher than the ECB’s target. This was attributable to the surging oil prices and global supply chain disruption, which possibly trigger the government’s bond yields to hike.
• The preliminary reading of South Korea’s GDP in 3Q21 was recorded to expand by 4% YoY. This pace of GDP growth was lower than the consensus estimate of 4.2%, primarily weighed down by the spread of Delta variant Covid-19.
• We still see that Covid-19 remains the biggest risk to a global economic recovery, which may result in different growth pace between countries.
Domestic Market Update
• The 10-year Indo GB yield continued to lower. As of Tuesday (10/26/21), the benchmark government bond yield closed 4 bps lower to 6.00%. This is in line with our lower bound forecast of 6.00%-6.10% range.
• The decline in local currency government bond’s yield for 10-year maturity was in line with Rupiah’s appreciation against USD and lower risk premium.
• The value of rupiah appreciated against USD to IDR 14,153/USD yesterday. Meanwhile 5-year Indo CDS dropped by 1.6 bps from 82.77 to 81.17 bps.
• Government has successfully raised funding from yesterday’s auction with the total awarded from seven series offered were IDR8tn. Despite the lower indicative target set by the government, investors’ appetite towards sovereign debt securities remain high as reflected by the total incoming bids of IDR69.53tn.
• As we already expected that investors strongly demand for next year’s benchmark series (FR0090, FR0091, and FR0092) indicated by the total incoming bids through those series were equal to IDR49.4tn or equivalent to 71% of the total incoming bids.
Market Projection
• We expect the 10 year Indo GB yield to decline to a range of 5.95% - 6.05% on Wednesday (10/27/21).
• Attractive Indo GB series to be traded today : FR0086, FR0090, FR0071, FR0078, FR0087, FR0091, FR0068, FR0080, FR0062 and FR0092.
Disclaimer
