Global Market Update
• U.S. financial markets started this week with a correction after commemorating labor day on Monday (09/06/21).
• The 10 year U.S. treasury yield rose by 5 bps to 1.37%. While yields on the benchmark government bond increased 1-5 bps along the curve yesterday.
• Meanwhile the DM countries such as U.K, Germany and Japan benchmark government bond yields have risen on a weekly basis following an increase of 6 bps in the 10 year U.S. treasury yield.
• U.S stock market closed mixed. DJI & S&P 500 fell 0.76% and 0.34% respectively. Nasdaq Composite gained 0.07% during the same period.
• Despite lower than expected Non Farm Payroll (NFP) figures in August-21, the wage increase raised concerns about inflation.
• Average hourly earnings jumped +0.6% MoM/+4.3% YoY in August-21. Even the leisure and hospitality which saw zero net job growth last month recorded wages increase of +1.3% MoM/+10.3% YoY.
Domestic Market Update
• ICBI closed at 328.16 yesterday gaining 0.03% from the previous trading session mainly driven by both the government & corporate bonds.
• The 10 year Indo GB yield was flat at 6.011%. IDR continued its appreciation against USD to 14.213/USD. Meanwhile at the same time 5 year Indo CDS remained stable below 70 bps.
• Government successfully issued 6 series of sovereign sharia securities and raising IDR10tn funding from yesterday auction. The total incoming bids were at IDR56.6tn indicating a high demand for less risky fixed income asset.
• We believe the success story was driven by : 1) investors ample liquidity; 2) high demand for fixed income assets amid limited supply of less risky asset in 2H21 following government front loading strategy of debt issuance; and 3) government cuts on Bond Income Tax for domestic investor to 10% from previously 15%.
• Indonesia FX reserves position stood at an all time high of USD144bn primarily due to the distribution of IMF XDR equivalent to USD6.5bn in August-21.
Market Projection
• We expect the 10 year Indo GB yield to fall within range of 6.10%-6.20% following the global yields trend.
• Attractive Indo GB series to be traded : FR0086, FR0090, FR0071, FR0078, FR0082, FR0087, FR0088 and FR0083.
Disclaimer
