24 Juli 2023
Fixed Income Report July 24, 2023
Global Market Updates
• Wall Street movement was inert upon last week’s closing, with Nasdaq experiencing further correction after Netflix’s and Tesla’s underperforming results, while DJI and S&P 500 lacked drive as investors put on a wait and see stance entering this week.
• The market will be greeted by a flurry of crucial data and earnings releases; of particular concern is Wednesday’s FOMC meeting news conference, which the market currently perceive would be in the form of a 25 bps hike (99.8% probability as per CME Fedwatch).
• The question now is where the Fed would be headed after Wednesday; last week’s stronger-than-expected labor data underlined that the fight against inflation might require more push.
• US long-term 10-year Treasury notes yields retreated back by -1.5 bps after the massive sell-off Thursday, while the short-termed 2-year notes remain slightly changed at 4.82%.
• Elsewhere, the 10-year German bund fell -2.1 bps while the 10-year UK Gilt rose +0.3 bps.
• The Chinese government held a rare but much needed meeting with global funds with aims to reascertain foreign investment appetites and revive the country’s economy.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government remained jumped on Friday (Jul 21, 2023). The 10-year LCY government bond’s (FR0096) yield along with other benchmark series in anticipation of more rate hikes to come after July.
• The spread between the 2-year and 10-year government bond remained at 23 bps (vs previous day’s/week’s 23 bps/23 bps).
• Upon last week’s closing, the IDR depreciated against the USD whilst mixed against other major currencies. The USD/IDR climbed by +0.25% to IDR15,025.
• The spread between 10-year US Treasury notes and 10-year benchmark Indo GB remains held at record-low levels (last: 238 bps), and after this week’s Fed rate hike and forward plans, we might be looking at a rate hike from BI.
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 6.25-6.30% for today.
• Attractive Indo GB series to be traded today : FR0064, FR0078, FR0081, FR0082, FR0087, FR0096.
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