Global Market Update
• Yields on the benchmark UST note mostly declined along the curve as the Fed’s policy move came in-line with the broad market expectations.
• The Fed delivered a +25 bps hike bringing FFR to 4.75% on two-days FOMC meeting.
• The 2-year and 10-year yield dropped 9 bps to 4.11% and 3.42% respectively in response to the Fed interest rate hike.
• US stock market recorded gain yesterday. The S&P 500 increased 1.05% while Nasdaq Composite jumped 2.00%.
• Fed’s chair Powell citing that ongoing increases in the interest rate will be appropriate in order to firming restrictive policy measures fighting against inflation.
• In addition, Powell also said that the disinflation process is still in early stage and current interest rates are not yet at a sufficiently restrictive despite slowing the pace of the hike in the two consecutive meeting.
Domestic Market Update
• Yield on the benchmark 10-year (FR0096) fell 5 bps to 6.64% on Wednesday (02/01/23).
• After experiencing an increase in yield lately, majority of the benchmark SUN price increased yesterday.
• The IDR strengthened against USD and was closed at IDR14,975/USD after previously closed at IDR14,990/USD.
• Indonesia’s 5-year CDS was consistently below 90 bps recently and closed at 84.1 bps.
• Statistics Indonesia reported Indonesia’s annual inflation rate at 5.28% YoY in Jan- 23, lower than consensus estimate of 5.40% YoY and BI’s forecast based on survey that expect a 5.33% YoY increase.
• Indonesia’s disinflation has occurred since 4Q22 and this may support ending interest rate hike.
• However, inflationary pressure in 1H23 will still be influenced by a seasonal factors, primarily driven by festive and Eid Fitr momentum.
• All in all, sentiment for Fixed Income assets to remain positive as inflation rate is slowing down and rate hike pace is not as aggressive as before.
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 6.60-6.80% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR040, FR0078, FR0085, FR0054, FR0096, FR0045, FR0050
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