Global Market Update
• The benchmark 10-year UST note yield fell 3 bps to 2.97% on Tuesday (07/12/22).
• Meanwhile the benchmark for shorter rate 2-year UST note yield also fell 3 bps to 3.05%
• However yields between shorter and longer maturity remain inverted. Spread of 2 and 10-year UST note was -8 bps.
• Investors focus on US inflation data that will be released on Wednesday, consensus estimate inflation rate to increase by 8.8% annually, higher than previous month figure.
• US benchmark equity indices fell last night. DJI was down by 0.62% while S&P 500 and Nasdaq Composite fell 0.92% and 0.95% respectively.
• Falling UST yields may indicate that US economy is on the brink of recession as the spread between short & long rate is still in negative territory.
• Historically, the inverted yield curve will be followed by economic output contraction with the median time of 533 days post the inversion.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) fell 2 bps to 7.26% on Tuesday (07/12/22).
• The IDR depreciated against USD to IDR 14,995/USD on Tuesday (vs IDR 14,975/USD on the previous day).
• Indonesia’s risk premium 5-year CDS jumped to above 150 bps yesterday.
• The government issued 6 series of SBSN amounting to IDR 6.025 trillion with
incoming bids reaching IDR 12.751 trillion on Tuesday (12/07/22).
• The awarded value in the SBSN auction yesterday was lower than the government's indicative target of IDR 7 trillion.
• The value of incoming bids was also lower than the previous auction which reached IDR15.78 trillion and investor appetite remain skewed towards shorter maturity bonds.
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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