Global Market Update
• The 10-year UST yield rose again to its highest level in the last 3 years at 2.60% on Wednesday (04/06/22).
• Meanwhile the 2-year counterpart fell 5 bps to 2.47% and now the spread turned to +13bps after previously inverted.
• Based on FOMC minutes of meeting, Fed officials plan to reduce bond holding on its balance sheet by USD95 bn/month.
• Furthermore, they also plan to increase 1 or 2x 50 bps interest rate to fight against high inflation.
• Previously, Fed’s Governor Lael Brainard has signaled more aggressive monetary tightening.
• Brainard said that US central bank need to reduce the size of its balance sheet at a rapid space and raising interest rate.
• US stock market continued to tumble with DJI was corrected by 0.42%; S&P 500 was down 0.97% and Nasdaq Composite fell 2.22%.
• Euro Area PPI recorded an increase of 31.4% YoY in Feb-22, the figure was higher than in previous month at 30.6% YoY but slightly in line with consensus estimate.
Domestic Market Update
• Yield on 10-year Indo GB increased 4 bps to 6.78% on Wednesday (04/06/22).
• The IDR weakened against USD to the level of IDR14,359/USD yesterday (vs IDR14,347/USD in the previous day).
• Risk premium which is reflected by the 5-year Indo CDS also rose to 81.05 bps (vs 77.72 bps in the previous day).
• Indonesia FX reserves is expected to remain high above USD140 bn in Mar-22 on the back of strong export performance.
• We think that sufficient FX reserves will likely to be positive for domestic bond market to cushion recent shock from aggressive monetary tightening as it support IDR fundamentals and stability.
Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to keep steady within a range of 6.70-6.80% for today.
• Attractive Indo GB series to be traded today : FR0086, FR0090, FR000071, FR0078, FR0087, FR0091.
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