Global Market Update
• The yield on 10-year UST note dropped by 13 bps to 2.75%, while yield on the 2- year UST note fell to 2.97% on Friday (07/22/22)
• Yield curve on 2/10-year UST note remained inverted and the spread between two securities was at -22 bps last week.
• Focus remains on FOMC meeting this week as market participants also anticipate +100 bps rate hikes for Jul-22 meeting.
• Based on CME Fed Watch data, the probability of Fed would raise 75 bps stood at 78.7%, while 21.3% probability for 100 bps hike.
• US majority stock indices dipped in red last Friday. Dow Jones was down 0.43%; S&P 500 fell 0.93% whereas Nasdaq Composite declined by 1.87%.
• Elsewhere, ECB decided to raise interest rate for the first time in the last 11 years to tame inflation.
• ECB raised benchmark policy rate by 50 bps. It is not only beating the market consensus of 25 bps rate hike but also ending Euro Zone a decade long ZLB environment.
• Concern of rising stagflation due to high inflation and bleak output growth probability has made investors appetite to become risk off.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) was flat at 7.47% on Friday (07/22/22).
• The IDR slightly strengthened to IDR15,018/USD last week and remained hovering around IDR15,000/USD level.
• On the other hand, Indonesia’s risk premium 5-year CDS continue to decline and was close at 128.39 bps.
• On the data front, BI reported broad money (M2) supply grew 10.6% YoY in Jun-22 driven by loan growth.
• Banking loan continued to accelerate and it grew +10.3% YoY in Jun-22. BI expect FY22F loan growth at 9-10% at an annual pace, higher than previous projection of 6-8%.
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 7.40-7.60% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0070, FR0077, FR0056, FR0078, FR0052, FR0073, FR0091.
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