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Company Update

27 September 2021

Fixed Income Report - September 27, 2021

Global Market Update

• The U.S. treasury yields ended higher last week. The 10 year U.S. treasury yield rose by 4 bps to 1.45%.
• Rising yields came after the Fed’s September policy meeting announcement and FOMC economic projection release.
• FOMC sees the economy is getting better and already made a substantial progress since the depths of pandemic a year ago, therefore central bank could start to slow the pace of asset purchase.
• Even though the Fed’s Chair Powell did not give a clear signal on when the taper begin, market expect it would be announced in November an would take effect in December, and will be concluded in the end of 2022.
• FOMC projected the U.S. economy will grow by 5.9% this year, or less than 7% in the June projection. However it is seen expanding faster in 2022 and 2023 as reflected by 50 bps and 10 bps up-revision.
• FOMC also see a higher inflationary pressure this year with PCE inflation is expected to be 4.2% this year vs 3.4% in June projection.
• The central bank committee also sees higher unemployment rate this year (4.8% vs 4.5%). • At the same time 9/18 of FOMC participants see a 25 bps rate hikes next year, causing yields to rise further.

Domestic Market Update
• The 10 year Indo GB yield rose to 6.16% on Friday (09/24/21) and remained within our forecast range of 6.15%-6.25% so far.
• 5 year Indo CDS increased by 2 bps to 79.29 bps while rupiah was depreciated to IDR 14,258/USD.
• As of August 2021, Bank Indonesia (BI) reported the value of total loans in Indonesia increased 1.16% over the same month in the previous year.
• The August 2021 figure marked the 3rd consecutive month of a positive growth after experiencing a contraction for 8 month straight since October-20.
• This is a good sign that banking intermediary function started to improve amid ample liquidity in the economy. Improving epidemiologic development also boost confidence that loan growth may increased 4-6% this year.

Market Projection
• We expect the 10 year Indo GB yield to rise and moving within range of 6.15% - 6.25% today on the back of rising U.S. treasury yield and monetary policy normalization that have already started globally.
• Attractive Indo GB series to be traded today : FR0086, FR0090, FR0071, FR0078, FR0082, FR0087, FR0091, FR0088

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