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Company Update

02 Agustus 2022

Fixed Income Report August 2, 2022

Global Market Update
• Yield on UST note continued to fall, but remained inverted. The benchmark 10-year UST note fell 7 bps to 2.58% on Monday (08/01/22).
• The shorter maturity UST note (2-year) also managed to decline but with the marginal change of 2 bps to 2.87% at the same time.
• Spread between 2/10-year UST note yield widened on negative territory and stood at -29 bps yesterday.
• Pressure on financial assets have eased recently. Some expect that inflation has reached the peak and start to normalize going forward as supply chain pressure ease and oil balance improved.
• In addition, market participants also already priced in Fed’s rate hike. Even with the slowing growth of economy, some expect that US CB to begin another easing cycle by early in 1Q23, yet still the real rates of US remained in a negative territory as inflation rate hitting the fastest pace in a more than 4 decades.
• The expectation of slowing economy also made oil price to decline.
 
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) was closed at 7.11% to start this week (08/01/22)
• IDR weakened against USD and was closed at IDR14,873/USD yesterday (vs IDR18,333/USD on last week).
• Indonesia 5-year CDS was slightly rising but still hovering around 100 bps.
• Statistics Indonesia reported Indonesia’s inflation rose +4.94% YoY in Jul-22, marking the fastest pace since Oct-15.
• Indonesia’s core CPI also rose by +2.86% YoY last month, indicating the rise of inflationary pressure.
• Now the differential between 7-day reverse repo rate and core CPI stood at the lowest point and below its 5-year historical average of 200 bps.
• With such a figure, we expect Bank Indonesia to start interest rate hikes policy as pre-emptive policy to anchor inflation.
 
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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