Company Update

31 Januari 2023

Fixed Income Report January 31, 2023

Global Market Update
• Yields on the short-term UST note increased slightly higher than its long-term maturity ahead of US FOMC meeting.
• The benchmark 2-year yield rose 4 bps to 4.24% while the benchmark 10-year yield increased 2 bps to 3.54% starting this week.
• The US stock market fell after recorded a gain last week. The DJI dropped 0.77%, while S&P 500 and Nasdaq Composite declined 1.29% and 1.96% respectively.
• Albeit increasing yield in the government bond and falling stock indices, majority of market participants still expect 25 bps hike for FFR in early Feb-23 as reflected by 98.1% probability of FFR to be brought at 4.50-4.75% according to CME FedWatch data.
• In Europe, Germany’s output shrank by -0.25% QoQ in 4Q22 according to flash reading.
• The contraction in Europe's largest economy was mainly driven by a decline in household consumption, amidst rising interest rates and high inflation.
• Annually, the Germany’s output growth slowed to 1.1% YoY in 4Q22, marking the weakest growth since 1Q21 which recorded a contraction of -2.1% YoY.
• The disappointing macro data could further reiterate ECB to slowdown the pace of interest rate hike.
Domestic Market Update
• Yield on the benchmark 10-year (FR0096) increased 2 bps 6.74% on Monday (01/30/23).
• After rallied earlier this year, government bond prices seemed to start reverting its trend.
• The IDR strengthened against USD and was closed at IDR14,970/USD after previously closed at IDR14,986/USD.
• Indonesia’s 5-year CDS was consistently below 90 bps recently and closed at 85.76 bps.
• Government of Indonesia plans to conduct SUN auction today offering 8 series targeting an issuance of IDR23-34.5tn.
• We believe, in spite of rising yield trend recently, investors appetite on government bonds to remain high given the probability of slower interest rate hikes.
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 6.65-6.85% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR040, FR0078, FR0085, FR0054, FR0096, FR0045, FR0050
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