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RESEARCH

Company Update

04 Agustus 2022

Fixed Income Report August 4, 2022

Global Market Update
• The benchmark 10-year UST note yield declined 4 bps to 2.71% while the 2-year yield rose 2 bps to 3.07% on Wednesday (08/03/22).
• Yield curve inversion on UST note remained and the spread between longer an shorter maturity rate widened to -36 bps.
• Market participants keep an eye on US CPI rate for July-22. Some expect inflation will normalize in 2H22.
• However Fed is expected to continue raising rate and bringing FY22E end year FFR at 3.25-3.50% .
• Majority of US stock indices increased yesterday. DJI rose 1.29%; S&P 500 was up 1.56% and Nasdaq Composite jumped 2.56%,
 
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) rose marginally by 1 bps to 7.21% on Wednesday (08/03/22).
• IDR weakened against USD and was closed at IDR14,913/USD yesterday (vs IDR14,889/USD on the previous day).
• Indonesia 5-year CDS also slightly declined to 102.98 bps yesterday (vs 106.08 bps on the previous day).
• Government financing through the issuance of debt securities reached IDR564.74tn as of August 2, 2022 (GDS: IDR359.93 trillion; Sukuk: IDR182.94 trillion; SKB III BI-MoF: IDR21.87 trillion).
• Lower SBN issuance reduces supply risk. On the other hand, the UST- SUN spread which is still below its historical level of 500 bps makes valuations less attractive and foreign investors continue to record outflows from the SBN market (IDR132.27 trillion YTD).
 
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 7.10-7.30% 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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