Global Market Updates
• US equity indices continued last week’s gain Monday (Jul 31, 2023), with the S&P closing at its 16-month high, the DJI slightly advancing while Nasdaq seeing hesitant gains ahead of the mega caps’, Apple and Amazon, release earnings.
• Minor economic reports Monday showed July Dallas Fed manufacturing outlook beating expectations (-20 vs -22.5), though July Chicago PMI fell short of the consensus (42.8 vs 43.5).
• US Treasury notes changed ever so slightly yesterday, with the 10-year yield having ticked up by only +0.8 bps to 3.96%, while the 2-year yield stood flat at 4.88, rendering the 2-10 year yield curve to be at -0.92.
• China’s bearish sentiment streak seems to have metamorphosed into optimism as per yesterday Chinese stocks saw a massive net foreign inflow of CNY49bn or USD6.9bn over the past 5 days, racking a new CNY230bn of YTD net foreign purchases, bolstered by pro-growth Politburo policies.
• The Bank of Japan announced an unscheduled bond-purchasing operation to contain the yield’s upsurge as it had jumped to its 9-year high of 0.6% Monday, with economists consensus of a 0.7% yield by the end of 2023E and no further policy tweak should take place until 2H24F. We see this new development to tame down market’s volatility.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government bonds was closed mixed Monday (Jul 31, 2023), with the 10-year (FR0096) yield retreating to 6.23%.
• The 2-year and 10-year yield curve narrowed to 23 bps (vs previous day’s/week’s 25 bps/24 bps), whereas the spread between UST 10-year and Indo GB 10-year was little changed.
• IDR continued to stronger against the USD, meanwhile weaken compared to other major currencies Monday. The USD/IDR strengthen by -0.10% in line with Indonesia vibrant economy condition.
• The government sukuk auction held today by the Ministry of Finance (MoF) will feature a new short-term treasury sukuk issuance (SPN-S30012024) with the indicative target kept at IDR6tn. We expect investor demand for sukuk remain high, as the total number of last bids has exceeded the target.
Market Forecast
• Given the recent developments that unfolded within the global and domestic markets, we expect the 10 year Indo GB yield to move within the range of 6.25%-6.30% for today.
• Attractive Indo GB series to be traded today : FR0081, FR0082, FR0087, FR0096.
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