09 Agustus 2023
Fixed Income Report August 9, 2023
Global Market Updates
• Yesterday’s rating downgrade move on 10 small and midsize American banks and a negative outlook imposed to 11 lenders by Moody’s Investor Service weighed down Wall Street Indexes.
• US Treasuries rose Tuesday, bolstered by a favorable 3-year note auction result of USD42bn in total sales, indicating that investors’ demand was stronger than had been expected.
• The 10-year UST note fell by -6.7 bps to 4.02%, followed suit by the 2-year notes that fell almost -2 bps to 4.74%, rendering the 2s10s UST curve at -0.72 bps.
• Asian equity futures weakening might indicate cautious stance from investors after China’s July exports and imports readings (-14.5% YoY/-12.4% YoY vs consensus’s -12.5% YoY/-5% YoY) highlighting the nation’s intensifying pressure on both domestic and external fronts. Stocks elsewhere fell ensuing Chinese gloomy news, as investors worry China’s slowdown might carry-over globally.
• China’s July slightly stronger-than-consensus inflation rate reading of -0.3% YoY/+0.2% MoM (vs -0.4% YoY/-0.2% MoM) might give glad tidings to global investors as a recovery might be set in motion, though the PPI readings came in weaker than expectations (-4.4% YoY vs -4.1% YoY).
Domestic Market Updates
• Indonesia’s benchmark series of LCY government mostly strengthened back Tuesday (Aug 8, 2023), where the 10-year (FR0096) yield edged down to 6.32%.
• The 2s10s Indo GB yield curve stagnated at 33 bps, whereas the 10-year UST and Indo GB curve continued its steepening, now standing at 229.5 bps.
• The IDR depreciated against the USD (USD/IDR up by -0.22%). We see the USD is currently gaining momentum on the back of China’s slowdown angst as investors seek for a safe haven currency.
• Investor appetite for SUN auctions (8/8) remains strong, with total bids reaching IDR32.5 trillion, exceeding the target of IDR14tn and the previous SUN auction total bids of IDR31tn, though the total winning bids was restricted to c. IDR9.8tn, reflecting a condition of state budget adequacy.
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 6.30-6.35% for today.
• Attractive Indo GB series to be traded today : FR0059, FR0082, FR0087, FR0096.
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