27 Juli 2023
Fixed Income Report July 27, 2023
Global Market Updates
• US equity indexes was closed mixed Wednesday (Jul 26, 2023) as the DJI strengthened +0.23% to its 17 month high, while S&P 500 flattened and Nasdaq retreated market discerned lower than expected earnings from tech stocks despite Meta’s earnings beating expectations.
• In line with the long-anticipated consensus, the Fed has officially raised their interest rates by 25 bps to its 22-year high, leaving options of an equal probability of either a further rate hike in September or a skip, highly depending upon the tune of upcoming crucial data releases.
• Yesterday’s new home sales reading fell short of market’s expectations and fell -2.5% MoM to 697k instead of 725k.
• Today the market awaits the release of US quarterly GDP growth rate in which a decline to 1.8% QoQ is expected (previously 2% QoQ), Jun durable goods orders which is also expected to fall, and initial jobless claims which is expected to break its shrinking streak and rise to c. 235k
• US long-term 10-year Treasury notes yields rose by +0.59 bps to 3.87%, while the short-termed 2-year notes fell by 3 bps, leaving the yield spread at -96 bps.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government bonds unanimously closed lower Wednesday (Jul 26, 2023), with the 10-year (FR0096) yield having risen by 3 bps to 6.25%.
• The spread between the the spread between the 2-year and 10-year benchmark series have widened to 28 bps (vs previous day’s/week’s 23 bps/23 bps), whereas against UST 10-year’s yield, the IndoGB 10-year’s spread stagnates at the 235 bps mark.
• The IDR weakened against the USD and as well as against other major currencies. The USD/IDR went up by +0.17% to IDR14,993.
• We observe the response of banks’ prime lending rate to remain stable with the spread against BI7DRR maintained at 304 bps, as banks resorted to cutting overhead costs amid rising cost of funds.
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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