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RESEARCH

Company Update

28 September 2021

Fixed Income Report - September 28, 2021

Global Market Update

• The U.S. treasury yield curve moved upward. The 10 year benchmark rate rose by 3 bps to 1.48% and hitting the highest level since July-21.
• Two Fed’s officials Williams & Brainard reiterated that U.S. economy has made substantial progress of recovery from the perspective of output, inflation and unemployment, therefore urging central bank to adjust the pace of its asset purchase.
• The 10 year U.S. treasury yield recorded an increase of 17 bps from a week ago following more hawkish stance of central bankers that see a quicker rates hike in 2022.
• Elsewhere, the ECB decided to keep interest rate unchanged, but said it would start conducting a moderately lower pace of net asset purchases under the PEPP for the rest of the year due to improved economic and financial conditions.
• The ECB also revised up the bloc economic projection with higher output (5% vs 4.6% estimated in June) and higher inflation (2.2% vs 1.9% estimated in June) in 2021.
• Keeping interest rate unchanged was also followed by two other central banks (BoE & BoJ), both took a more dovish stance.
• BoE pegged it bond buying program at a total of GBP 895 billion by the end of this year, while BoJ decided to maintain the target for the 10-year government bond yield at around 0%.
• We already see now that the path to monetary policy normalization is widely open. Hence propping up the government bond yields.

Domestic Market Update
• The 10 year Indo GB yield rose to 6.20% on Monday (09/27/21) and remained within our forecast range of 6.15%-6.25% so far.
• Rising the local currency denominated bond yields was attributable to a higher yields environment globally.
• 5 year Indo CDS increased to a near of 80 bps while rupiah remained stable below IDR 14,300/USD.

Market Projection
• Government will conduct debt securities auction for 7 series with lower indicative target of IDR12-18tn on Tuesday (09/28/21). Lower indicative target was driven by a front loading issuance strategy in 1H21 amid concern of a more hawkish stance from global central banks in 2H21.
• We expect the 10 year Indo GB yield to rise again and moving within range of 6.15% - 6.25% today on the back of rising U.S. treasury yield.
• Attractive Indo GB series to be traded today : FR0086, FR0090, FR0064, FR0071, FR0078, FR0082, FR0087, FR0091, FR0088, FR0062.

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