14 Agustus 2023
Fixed Income Report August 14, 2023
Global Market Updates
• US equity indexes closed mixed Friday (Aug 11, 2023), with the S&P 500 (-0.1%) booking its 2nd consecutive weekly loss, followed by Nasdaq’s wavering momentum of the tech companies (-0.7%), while DJI squeezed a +0.3% gain as the Fed’s hawkish shadows still lingers in the market.
• Last week’s mixed CPI data incited Fed comments that more work still needs to be done to ensure the 2% inflation target will be met, as Friday’s July PPI reading showed a 0.8% YoY increase.
• The market anticipates that the Fed will keep their rates pinned higher for far longer than traders currently expect, with rate cuts highly unlikely to commence until May-24.
• The heightened volatility will put treasuries under more pressure, even more so as increases in new debt sales induced by mounting state deficits are to continue. The 2-year UST yield jumped c. 6% and the 10-year by c. +5 bps Friday.
• China’s slacking credit demand growth in July was a clear-cut sign that PBoC’s June cuts were inadequate to effectively stimulate the economy, further elucidated by July’s lack of rebound in the property retail, industrial and property sector.
• Despite this, consesnsus still sees a rate hold in August to balance out the risk of further yuan depreciation and foreign outflow.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government was closed in the mix Friday (Aug 11, 2023), as investors weighed on the global treasury instability.
• The 10-year (FR0096) yield stood flat at 6.31% but slightly depreciated, while the longer 20-year FR0097 bonds appreciated.
• The IDR depreciated against the USD Friday (USD/IDR gained +0.20%) as the DXY itself was on a rally for the past week.
• As of Aug 10, foreign flow into Indonesian government securities posted a net inflow from the previous day (+IDR930bn of positions), though still records a net outflow of –IDR710bn MtD.
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 : FR0056, FR0081, FR0082, FR0087, FR0096.
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