29 Agustus 2023
Fixed Income Report August 29, 2023
Global Market Updates
• Wall Street equities managed to post further gains Monday (Aug 28, 2023), with S&P 500, DJI and Nasdaq closed up 0.63%, 0.62% and 0.74%, respectively, from Fed’s neutral stance echoes for the upcoming Sep-23 FOMC meeting.
• US Treasuries rebounded Monday, with the 10-year UST yield falling by c. 5 bps to 4.20%, followed by the 2-year UST yield that fell c. 5 bps to 4.98%. The 2s10s spread bear steepened to -0.78 bps.
• The current yield levels may already by sufficiently attractive for the longer-termed durations, and could compel real money investors to start adding their durations.
• For the front-end yields, however, short positions seem to be the most echoed strategy due to the recent light on economic activities and the level of uncertainty in monetary policy.
• Market participants have raised their wager on rate hikes probability in both Sep-23 and Nov-23 FOMC meeting, each standing at 22% and 50.9% according to CME FedWatch.
• Shanghai’s CSI 300 index’s PE has plummeted below its 10-year average and while it’s valuation may be attractive to induce inflow, foreign funds are still on the lookout for a more robust sign of recovery in the economy.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds mainly appreciated Monday (Aug 28, 2023). The 10-year Indonesian government bond benchmark series (FR0096) yields fell by -6.1 bps to 6.45%.
• The Indonesian gov’t 2s10s bond curve further bull flattened to 13 bps (vs 19 bps previously).
• Today’s SBSN securities auction features an all-reopening series (SPN-S 14022024, PBS036, PBS003, PBSG001, PBS037 and PBS033).
• We might see avoidance of front-end yield series and investors’ addition of duration to persist in today’s auction.
• The IDR stood flat against the USD (USD/IDR edged down by 0.03%), following UST yields’ slip.
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 6.40-6.50% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0082, FR0087, FR0096.
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