15 Agustus 2023
Fixed Income Report August 15, 2023
Global Market Updates
• Wall Street indexes garnered strength Monday (Aug 14, 2023), mainly propped up by the tech sector as Nasdaq led the gains (+1.05%), followed by S&P 500 (+0.58%) and DJI (+0.07%).
• US Treasury yields and global bond yields saw gains yesterday: the 10-year yields went up by 4 bps followed with the 2-year yields soaring by 7 bps, while the German and UK 10-year yields went up by 1.4 bps and 3.9 bps, respectively.
• This was mainly propagated by investor’s perception that US interest rates are to remain higher than inflation for the foreseeable future, at least until 5M23 next year.
• This strengthened the USD and put the JPY under more pressure despite BoJ lifting their fingers off their yield control (UST and JGB spread widened to 358 bps), and we might see yen-buying interventions if this trend persists.
• China’s property crash has started to seep into their USD3tn asset management industry as Zhongrong International Trust Co. (their AUM comprises 9.2% of China’s total debt) reported delayed payments of maturing wealth products, with fears of similar trends to potentially spiral onwards.
• Investors will await upcoming data releases today (industrial output, retail sales and FI investments) to assess the central bank’s willingness to loosen their policies, considering the CNY has slumped more than -5% YTD.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government unanimously depreciated Monday (Aug 14, 2023), in alignment with global bonds movement. The 10-year (FR0096) yield soared by c. 6 bps to 6.37%.
• The IDR understandably weakened against the USD yesterday (USD/IDR gained +0.66%) as the DXY continued its rally amid the pricing in of higher-for-longer sentiments.
• BI reported the minimum obligation of 30% natural resources DHE was recorded at USD448mn. This was part of the government policy to increase foreign exchange reserves and fortify the IDR.
• The government sukuk auction held today by the MoF will feature a new short-term treasury sukuk issuance (SPN-S14022024) with the indicative target kept at IDR6tn. We might see higher numbers of bids now that yields have risen.
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 6.35-6.40% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0082, FR0087, FR0096.
Disclaimer On
