Global Market Update
• The benchmark 10-year UST note yield remained flat at 3.68% on Wednesday (12/21/22).
• The benchmark for short term rate of 2-year maturity decreased 4 bps to 4.21%.
• Yield curve inversion narrowed and the spread of 2/10 year benchmark stood at -53 bps (vs -56 bps the previous day).
• US equities indices continued to grow yesterday. The DJI hiked 1.60%; S&P 500 rose 1.49% and Nasdaq Composite was 1.54% higher.
• Inflation rate in Canada slimmed down to 6.8% YoY in Nov-22 from 6.9% YoY in Oct-22, largely propped by easing gasoline prices from the reopening of US oil refineries, but partly offset by rising food prices, mortgage and rent.
• The latest GfK Consumer Climate Indicator of Germany saw an improvement at -37.8 heading into the new year (vs -40.1 in Dec-22), exceeding consensus of -38, followed by upswings in income expectations (-43.4 vs -54.3) as well as economic conditions (-10.3 vs -17.9), owing to the prudent policymaking of the government.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) slightly increased to 6.90% on Wednesday (12/21/22).
• Indonesia’s 5-year CDS levelled at 104.08 bps yesterday (vs 104.64 the previous day).
• The IDR strengthened against the USD and was closed at IDR15,588/USD on Wednesday (vs IDR15,603/USD the previous day).
• Advancing into Bank Indonesia’s board meeting, we can expect some mild increase in the BI7D Repo Rate due to: 1) the latest inflation rate (5.42% in Nov-22) is still far from the targeted <4% by 1H23, or 3% by the end of 2023, and 2) preemptive measures towards The Fed’s rising target rate to a 4.5- 4.75% range (72.6% probability) in Feb-23.
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 6.80-7.00% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0081, FR0095, FR0052, FR0073, FR0054, FR0091, FR0096.
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