26 Juli 2023
Fixed Income Report July 26, 2023
Global Market Updates
• US equity indexes continued to close in the green with Nasdaq Composite leading the gain (+0.61%) followed by S&P500 (+0.28%) and DJI (+0.08%), catapulted by the two-year high consumer confidence index reading and positive anticipations revolved around earnings releases, with Alphabet Inc. earnings having exceeded analysts’ expectations.
• Ahead of the Fed’s FOMC, strong consumer confidence readings directs the narrative towards a soft-landing for the US economy, though it’d be premature to say the Fed is settling down from its fight against inflation.
• Rates on swap contracts priced-in a 50% chance another 25 bps hike is to take place after July, and depending on the this Friday’s supercore PCE reading, we might see a higher for longer scenario.
• US long-term 10-year Treasury notes yields rose by +1.19 bps to 3.90%, while the Fed sentiment-sensitive short-termed 2-year notes fell by 5 bps. Elsewhere, the 10-year German bund remain muted, whereas the 10-year UK Gilt rose +1.2 bps to 4.27%.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government bonds saw a mild depreciation Tuesday (Jul 25, 2023) following BI’s RDG resolution on leaving the 7DRR unchanged at 5.75%.
• The 10-year (FR0096) yield remain muted at 6.22%, while also being the highly bidded series from yesterday’s SUN auction, with a total bid value of IDR12.8tn and a bid-to-cover of 3.1x.
• We saw a decline in the total incoming bids of IDR30.9tn compared to the last auctions IDR47tn as investors likely remained alert ahead of the RDG and the Fed’s FOMC.
• The IDR appreciated against the USD and was mixed against other major currencies. The USD/IDR went down by -0.2% to IDR14,993.
• BI reiterated to maintain current 7DRR even if the Fed is still looking at two rate hikes to come this year, fixating their focus on IDR stabilization through their triple intervention scheme, macroprudential liquidity incentives to boost credit growth, and growth inclusion for MSMEs by MDR adjustments (currently at 0.3%).
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 : FR0077, FR0081, FR0082, FR0087, FR0096.
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