Company Update

01 Agustus 2022

Fixed Income Report August 1, 2022

Global Market Update
• Supply chain pressure started to ease along with inflation expectation. However global economic slowdown could be tracked from recent oil prices.
• Brent and WTI prices have declined from the peak at above USD120/bbl in early Jun-22.
• WTI price was closed at <USD100/bbl last week. In addition, US economy also show a sign of slowing as GDP shrank by 0.9% in 2Q22, whereas claim on unemployment rose.
• On the other hand, USD index also started to ease since the second week of July, as investors have priced in Fed’s rate hike.
• Furthermore, pressure on financial assets also eased as most of Wall Street stock indices rebounded with >5% monthly gain in the first month of 3Q22.
• Yields on UST note continued to decline. The benchmark 10-year UST note yield dropped by 10 bps on a weekly basis and stood at 2.65% last Friday (07/29/22).
• However yield curve remains inverted as 2/10-year UST note yield spread still in negative territory (-23 bps) last week.

Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) fell 10 bps to 7.14% on Friday (07/29/22). This was the lowest level since the second week of Jun-22.
• Falling the benchmark Indo GB yield was also followed by strengthening IDR and declining risk premium.
• IDR strengthened against USD and was closed at IDR14,833/USD last Friday (vs IDR19,22/USD on Thursday).
• Indonesia 5-year CDS also declined to 104.18 bps last week from 112.22 bps in the previous day.
• Bank Indonesia (BI) expects inflation to increase by +0.50% MoM/+4.79% YoY in Jul-22. Consensus expects inflation to rise +4.82% YoY Jul-22.
• We expect inflation to rise +0.59% MoM/+4.89% YoY and become the highest inflation in more than 6 years.
• The rising inflation was driven by supply side disruption as well as government price adjustment while core CPI was still in-line with BI target at 2-4% so far.

Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 7.05-7.25% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0070, FR0077, FR0037, FR0090, FR0052, FR0085, FR0073, FR0054 and FR0091.

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