Company Update

11 Juli 2022

Fixed Income Report July 11, 2022

Global Market Update
• The benchmark 10-year UST note yield rose 8 bps to 3.08% on Friday (07/08/22).
• Yields between shorter dan longer maturity were still inverted with the 2-year UST note at 3.11% bringing the spread to 10-year benchmark rate at -3 bps.
• Yield curve inversion is seen as leading indicator that US economy may weaken or even falling into recession.
• With high inflation that hurts economy, US central bank also plan to aggressively tighten their monetary policy.
• The Fed is now leaning towards 75 bps rate hike in Jul-22 FOMC meeting, and this trigger a yield spike.
• The jump in UST note yield was also followed by another spike in other countries government bond yields.
• Interestingly, US stock indices rebounded last week. On a weekly basis, DJI was up by 0.77%; S&P 500 rose 1.94% while Nasdaq Composite jumped 4.56%.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) was closed flat at 7.25% on Friday (07/08/22).
• The IDR strengthened against USD to IDR 14,979/USD on Friday (vs IDR 15,002/USD on the previous day).
• Indonesia’s risk premium 5-year CDS also dropped to 145,28 bps last week from 149.63 bps previously.
• Outflows continued in the domestic financial market as reflected by foreign investors net selling of IDR3.54 trillion in the SBN market and net selling off IDR2.66 trillion in the stock market in 4-7 July 2022.
• Factors triggering the outflows: 1) the increased risk of global stagflation and 2) the aggressiveness of the Fed in raising the benchmark interest rate.
• Looking ahead, we view that the outflows may persist and posing a risk in the domestic financial market.
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 7.25-7.45% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0081, FR0084, FR0090, FR0047, FR0052, FR0054, FR0091.
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