21 Juli 2023
Fixed Income Report July 21, 2023
Global Market Updates
• Wall Street was closed in the mix after dull earnings releases from the tech sector weighed on Nasdaq Composite, while the DJI managed to garner momentum and rose to a 15-month high propped by better than expected earnings from Johnson & Johnson and IBM.
• Yesterday’s US Initial Jobless Claims readings came in at 228k, beating market expectations of an increase to 240k (previously 237k), showing resilient labor market.
• Despite this, business prospects are looking dim, as indicated by July’s Philadelphia Fed Business Outlook only rose to -13.5 (vs expectations of -10.0) from -13.7, backed by June leading indicators that fell 0.7% MoM or below market’s projection of -0.6% MoM, while June Existing Home Sales also fell short of consensus (4.2 mn), amounting to 4.16 mn or slipped -3.3% MoM.
• The consensus remains that the Fed is most likely to pause their hawkish cycle after July’s FOMC terminal hike.
• China’s banks have kept their Loan Prime Rates unchanged, but will probably enact further cuts in 3Q23 ensuing the PBoC’s Medium-term Lending Facility trim projected to take place in Aug-23 or Sep-23 in order to prevent a hrad landing in the property sector and the economy as a whole.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government remained relatively flat Thursday (Jul 20, 2023). The 10-year LCY government bond’s (FR0096) yield stagnated while garnering slight appreciation along with the other benchmark series.
• The spread between the 2-year and 10-year government bond slightly widened to 23 bps (vs previous day’s/week’s 21 bps/24 bps).
• IDR continued to edge stronger against the USD along with most other major currencies Thursday. The USD/IDR went a tad under by -0.05% to IDR14,988, in tandem with DXY’s weakening by -0.07%.
• Bank Indonesia’s recent lending growth survey indicated that 2Q23’s new lending activities to have grown as reflected by a net weighted balance of 94% (vs 1Q23’s 63,7%), and will remain strong throughout 3Q23 (86%) until the end of the year (FY23’s credit growth to reach 10.9% YoY).
Market Forecast
• Given the recent developments that unfolded within the global and domestic markets, we expect the 10 year Indo GB yield to move within the range of 6.15-6.25% for today.
• Attractive Indo GB series to be traded today : FR0064, FR0078, FR0081, FR0082, FR0087, FR0096.
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