30 Agustus 2023
Fixed Income Report August 30, 2023
Global Market Updates
• Wall Street equities posted further gains Tuesday (Aug 29, 2023), with S&P 500, DJI and Nasdaq closing stronger by 1.45%, 0.85% and 0.74%, respectively, in light of weak economic data readings.
• US Treasuries continues its bull run Tuesday, with the 10-year UST yield falling by c. 8 bps to 4.12%, followed by the 2-year UST yield that fell c. 5 bps to 4.87%. The 2s10s spread flattened to -0.75 bps.
• Stocks and treasuries garnered bull momentum as: 1) Tuesday’s July JOLTS job openings came in at 8.8mn, weaker than market’s expectations of 9.5mn, as well as 2) Aug CB Consumer Confidence came short of consensus’ anticipation of 116, at only 106.1 (vs previous month’s 117).
• This showed high rates have bitten deeper into the economy and that the Fed is likely to consider holds here on out. Market participants have raised their wager on a rate hold probability for Sep-23 FOMC to 89% and for Nov-23’s FOMC meeting to 52.2% according to CME FedWatch.
• Global equities and bonds followed the bull run. UK 10-year gilt slipped 1.9 bps to 4.42%, German 10-year bunds fell 5.5 bps to 2.5%, and the Japanese 10-yr gov’t bond went down 1.1 bps to 0.65%.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds mainly appreciated Tuesday (Aug 29, 2023). The 10-year Indonesian government bond benchmark series (FR0096) yields fell by another -8.2 bps to 6.36%.
• The Indonesian gov’t 2s10s bond curve further bull flattened to 9 bps (vs 13 bps previously).
• Yesterday’s sharia government securities auction booked a total incoming bids of IDR21.3tn, higher than last auction’s IDR20.2tn.
• PBS036 remained as the most sought-after series, with total incoming bids of IDR13.4tn (rose from last auction’s IDR11.6tn) and total awarded nominal of IDR4.3tn.
• The trend for sharia gov’t securities seems to be opposite to that of gov’t bonds, in that the gov’t sukuk curve moves in a bear flattening pattern as investors prefer shorter-duration as opposed to longer.
• The IDR appreciated against the USD (USD/IDR dropped by 0.2%), following UST’s bull.
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 6.30-6.40% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0082, FR0087, FR0096.
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