Global Market Update
• Yields on benchmark UST note climbed ahead of inflation data release that due on Thursday (01/12/23).
• The benchmark 10-year UST note yield increased 8 bps to 3.62%, whereas the short term rate (2-year UST note) rose 4 bps to 4.25%.
• Based on consensus forecast, US inflation is expected to rise by 6.5% YoY in Dec-22, or lower than in Nov-22 figure of 7.1% YoY.
• US economy has experienced a disinflation since 2H22, while manufacturing activity contracted.
• The expectation of lower inflation has pushed up US equity valuation as market expect the end of aggressive rate hikes is likely to come any time soon.
• Nasdaq Composite outperformed DJI and S&P 500 with 1.01% appreciation yesterday. Furthermore, Nasdaq Composite has risen 3.42% YTD.
Domestic Market Update
• Yield on the benchmark 10-year Indo GB (FR0096) continued to fall. Yield dropped 6 bps to 6.83% on Tuesday (01/10/22).
• The IDR weakened slightly against USD and was closed at IDR15,76/USD yesterday (vs IDR 15,568/USD on Monday).
• On the other hand, the 5-year Indo CDS slightly increased to 93.63 bps, yet consistently below 100 bps.
• The government has issued SBSN of IDR13.85tn in an auction on Tuesday (10/01/23). The emission value was slightly lower than the indicative target of IDR 14 trillion, with a total incoming bid of IDR17.45tn.
• Albeit the auctions at the beginning of the year tended to be quiet, we foresee that portfolio rebalancing to fixed income assets, especially SBN, can be a positive catalyst for subsequent SBN auctions, in line with foreign inflows into SBN and a downward trend in yields in response to the disinflationary phenomenon.
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 6.79-6.89% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0070, FR0077, FR0044, FR0085 and FR0096.
Disclaimer On
