11 Juli 2023
Fixed Income Report July 11, 2023
Global Market Updates
• Wall street managed to start the week in the green yesterday (Jul 10, 2023): DJI rebounded +0.62%, followed by S&P 500 and Nasdaq that edged up +0.24% and +0.18%
• Stocks were able to get a breather on the back of US Treasury note yields’ retreat and anticipations of a further easing on Wednesday’s June CPI data reading (forecasts: 3.1% YoY) as proxied by the recent used-car prices slump of -10.3% YoY and -4.2% MoM, the biggest annual drop since January.
• The US long-term 10-year treasury yield closed -5 bps lower, while the shorter-termed 2-year yield followed up with a -9 bps decline, narrowing the 2-10 year yield spread to -0.85 bps.
• Fed’s Barr, Daly and Mester once again reiterated the focus on pinning down inflation to 2% and offers no room for doubt on July’s rate hike: likelihood is now discounted at 94.2% (vs 92.4% on the previous day), with possibilities of another hike after the summer hiatus.
• Global bonds saw a mixed close; the 10-year UK Gilt fell by another -1.0 bps to 4.64%, while the 10-year German bund yield edged +0.3 bps along with the Japanese govt’s 10-year bond that rose +3.4 bps higher to 0.46%.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government bond further depreciated yesterday (Jul 10, 2023). Indonesia’s benchmark 10-year LCY government bond’s (FR0096) yield notched up 1 bps, whereas other benchmark yields climbed higher.
• We see the yields’ uprise since last week to be in tune with foreign outflows from bonds while equities enjoy increasing inflows, and could continue into this week amid hawkish pressures.
• IDR weakened against most major currencies yesterday. The USD/IDR rate rose by +0.60% and was closed at IDR15,135.
• The Ministry of Finance (MoF) of Indonesia’s government securities (SBN) auction today will showcase several reopenings (SPN12231012, SPN12240411, FR0095, FR0096, FR0098, FR0097 and FR0089), with a lower indicative target of IDR14tn and maximum target of IDR21tn as MoF reiterates their confidence of a down revised state budget deficit, ~2.3% of FY23E’s GDP.
Market Forecast
• Given the recent developments that unfolded within the global and domestic markets, we expect the 10 year Indo GB yield to continue upwards within the range of 6.20-6.30% for today.
• Attractive Indo GB series to be traded today : FR0064, FR0081, FR0082, FR0087, FR0096.
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