11 Agustus 2023
Fixed Income Report August 11, 2023
Global Market Updates
• US equity indexes closed higher Thursday (Aug 10, 2023) while at the same time US Treasuries saw a rebound after having declined for several days prior as markets discerned inflation readings, unemployment readings and Treasury auction results.
• US July CPI tamed down to +3.2% YoY or below expectations of +3.3% YoY, while core CPI hit the bullseye with the consensus at +4.7% YoY, showing disinflationary progress to be right on track.
• Weekly Initial Jobless Claims rose beyond consensus of 230k to 248k, indicating that the tightness in the labor market has started to unwind, further shown by the 4-week Jobless Claims have risen to 231k vs 228k previously.
• So far the soft-landing narrative seems likely to preserve, with markets pricing in an 89% probability of a rate hold in Sep-23 FOMC meeting.
• The 30-year UST auction showed investors, in particular pension and insurance funds, lacked the eagerness to take on the long term risk amid soft landing narrative, lingering uncertainty and a vacation season, pushing the 2-yr, 10-yr and 30-yr yields by +3 bps, +9 bps and +6 bps.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government remained muted Thursday (Aug 10, 2023), where the 10-year (FR0096) yield stood flat at 6.31%, leaving the 2s10s Indo GB curve at 32 bps.
• The IDR stood firm against the USD yesterday (USD/IDR edged down by -0.04%).
• As of Aug 9, 2023, Indonesian government securities saw a muted total daily net flow, but has shown noticeable net foreign outflows of IDR956bn, which possibly could have been relocated to the USTs, whereby the Treasury refunding auctions showed strong demand.
• The newly founded slump in USTs pulled the 10-yr UST and Indo GB curve to 217 bps, and we might see further foreign outflows to ensue.
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 6.30-6.35% for today.
• Attractive Indo GB series to be traded today : FR0059, FR0081, FR0082, FR0087, FR0096.
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