Global Market Update
• UST note yield 2-6 bps along the curve to start this week on Monday (07/25/22).
• The benchmark 10-year UST note yield rose 5 bps to 2.80% while the 2- year UST note yield also increased 5 bps to 3.02%.
• Spread between 2/10 year UST note yield remained -22 bps indicating a yield curve inversion.
• Market focus remain on Fed’s FOMC policy meeting this week and participants broadly expect US CB to move with another 75 bps rate hike this time.
• Treasury Secretary Janet Yellen also said that US economy is at risk of recession now.
• High inflation and a tightening in monetary policy is expected to dampen economic growth.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) declined 10 bps to 7.37% on Monday (07/25/22).
•The IDR strengthened to IDR14,993/USD yesterday compared to IDR15,014/USD last week.
• On the other hand, Indonesia’s risk premium 5-year CDS also continued to decline and was close at 116,18 bps (vs >120 bps last week).
• BI plans to sell SBN with a tenor of <5 years worth IDR70 trillion in the secondary market.
• We see that this is BI's policy is a further step to normalize banking liquidity after the increase in the Statutory Reserves.
• On the other hand, the sale of SBN by BI will have an impact on increasing yields, making SBN valuations more attractive to trigger an inflows.
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 7.30-7.50% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0070, FR0077, FR0056, FR0078, FR0052, FR0073, FR0091.
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