Global Market Updates
• Wall Street equities edged higher on Thursday’s close (Feb 01, 2024). DJI rose by +0.97%, S&P 500 grew by +1.25%, and Nasdaq closed up by +1.30%.
• Stocks rebounded on Thursday’s, recouping a notable portion of the prior day's losses following Fed Chair Powell's announcement against a March rate cut. Stock retained their gains on improved prospects for a soft landing after the January ISM manufacturing index unexpectedly surged to a 15-month high.
• US Treasury 10-yr yields fell by -12 bps to 3.87%, and 2-yr yields down by -7 bps to 4.20% on Thursday. 10-yr yield slipped to a 5-week low buoyed by favorable economic repots.
• As anticipated, the Fed maintained it’s interest rate at 5.25%-5.50%. The potential for firming was omitted, cautioning against immediate easing until confidence is established in reaching the 2% inflation target.
• US weekly initial unemployment claims unexpectedly rose to 224,000, a 2-1/2 month high, showing a weaker labor market than the expected decline to 212,000.
• US Q4 nonfarm productivity exceeded expectations at +3.2% of +2.5%, while Q4 unit labor costs fell below expectations, increasing by +0.5% instead of the anticipated +1.2%.
• US Jan-24 ISM manufacturing index unexpectedly rose to a 15-month high of 49.1, surpassing the expected decline to 47.2. US Dec construction spending increased by +0.9% MoM, surpassing expectations of +0.5% MoM.
• The BOE held the bank rate steady at 5.25%, dropping its reference to further tightening. However, it emphasized the need for more evidence of moderating inflation before considering interest rate cuts.
• Eurozone Jan CPI eased to +2.8% YoY from Dec's +2.9%, surpassing expectations of +2.7% YoY. Jan core CPI eased to +3.3% YoY from Dec's +3.4%, also surpassing expectations of +3.2% YoY.
• Global bond yields were mixed on Thursday; the German bund 10-yr yield fell by -11.2 bps to 2.15%, while the UK gilt 10-yr yield down by -10.7 bps to 3.79%. The Japanese GB 10-yr yield closed up by 1.50 at 0.73%.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds closed higher on Thursday (Feb 01, 2024), with the 10-yr benchmark yield fell -2.10 bps to 6.58%.
• The IDR appreciated against the USD (USD/IDR fell by -0.10% to 15,765) at Thursday’s close. The DXY increased by 0.50% to 103.59 following the Fed‘s decision to keep the interest rate unchanged, while current market projections suggest that the Fed will commence rate cuts in May 2024.
• BPS reported a monthly inflation rate of 0.04% in Jan-24, with the Consumer Price Index (IHK) rising by 105.19. Meanwhile, the yearly inflation rate was 2.57% YoY. We see a decreasing trend in inflation, and the stability of the rupiah suggests the potential for a BI rate cut in 2H24.
• The government will conduct SBSN auction on Monday, February 5. The series of SBSN to be auctioned includes SPN-S and PBS series with an indicative target of IDR12tn.
Market Forecast
• Given the recent developments that unfolded within the global and domestic markets, we expect the 10-yr Indo GB yield to move within the range of 6.55-6.70% for today.
• Attractive Indo GB series to be traded today : FR0081, FR0091, FR0096, FR0100 FR101.
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