Global Market Update
• The U.S treasury yields started to ease after rising more than 20 bps in a week, followed by lower global government bond yields. The yield on the benchmark government bond with 10 year maturity downed about 3 bps to 1.51% last night.
• At the same time yield on longer maturity of U.S. treasury notes saw a more limited decline.
• Market sentiments are now driven by 3 things : monetary policy normalization agenda, progress on debt ceilings and China Evergrande missed interest payment.
• From the monetary policy perspective, Fed’s Chair Jerome Powell said that tensions between jobs and inflation is the chief challenge facing the Fed.
• Meanwhile the failure to rise on debt ceilings would likely to cause government shutdown and technical default.
• Should the technical default occur, the government bond yields are expected to see an upward pressure.
• Elsewhere in China, Evergrande is set to miss second offshore bond coupon payment this month.
Domestic Market Update
• The 10 year Indo GB yield rose 4 bps to 6.24% on Wednesday (09/29/21) yet remained within our forecast range of 6.20%-6.30% so far.
• However the benchmark government bond yield has risen by 10 bps in a week.
• 5 year Indo CDS topping stayed flat at 82.68 bps while rupiah depreciated to IDR 14,293/USD.
• Banks are now reducing their holdings in government securities and their funds at central bank as demand for credit is improving according to Indonesia Deposit Insurance Agency.
• With ample liquidity and better economic outlook, we believe that banks appetite to disburse loan and demand for credit will likely to increase in the coming months.
Market Projection
• We expect the 10 year Indo GB yield to stay a flat and moving within range of 6.20% - 6.20% today.
• Attractive Indo GB series to be traded today : FR0086, FR0090, FR0064, FR0071, FR0078, FR0082, FR0087, FR0091, FR0088, FR0083 and FR0062.
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