Global Market Updates
• US equities posted a rebound starting off this week supported by investors’ optimism on 2Q23 company releases to continue outperforming, coupled with stronger-than-expected credit growth of +USD17.8bn (vs estimates of +USD13bn).
• The air of optimism was put to moderation after Fed’s Bowman and Williams hawkish remarks yesterday, sending the US 10-year Treasury yield to jump 550 bps to 4.09%, followed by 10-year Gilt to soar 810 bps to 4.46% and the German 10-year bund to gain 390 bps to 2.6%.
• The market’s appetite for US Treasuries will be tested this week as the largest UST auction amounting to USD103bn will await market’s absorption.
• The Bank of Japan has clearly shown to begin putting their guards up amid recent price jumps, underpinned by not only rising cost pressures but also solid national demand, all of which increase the odds that they will abandon its yield curve control sooner than expected.
• China’s July trade data release is likely to show exports and imports continuing its slack upon soft external demand and weak domestic goods consumption. The market now considers China to be in a deflationary period with the most recent consensus pointing to a -0.4% YoY drop in July CPI.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government bonds continued to weaken Monday (Aug 7, 2023), where the 10-year (FR0096) yield have now reached 6.34%.
• The 2s10s Indo gov’t note and bond yield curve steepened further to 34 bps (vs 33 bps previously).
• The IDR continued to appreciate against the USD (USD/IDR down by -0.1%) in tandem with DXY’s weakening.
• Indonesia posted stronger-than-consensus +5.17% YoY GDP growth in 2Q23 (vs expected softening of +5% YoY) as the strong household consumption which jumped +5.23% YoY (vs +4.54% YoY in 1Q23) more than offseted the -2.75% YoY exports contraction.
• If the solid growth persists in the coming quarters we can expect bond yields to increase following a grow credit demand and increased inflation expectations.
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 : FR0059, FR0082, FR0087, FR0096.
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