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28 Juli 2022

Fixed Income Report July 28, 2022

Global Market Update
• Fed decided to raise FFR by 75 bps on July-22 policy meeting, in-line with market expectation.
• Majority of UST note yield fell. The benchmark 10-year UST note dropped 2 bps to 2.79% on Wednesday (07/27/22).
• Meanwhile at the same time, yield on 2-year UST note fell 6 bps to 3.00%. • Spread between 2/10-year UST note remained in a negative territory indicating a yield curve inversion.
• Going forward, Fed’s chair Powell said that US CB may opt another 75 bps rate hike but suggesting to be more data driven.
• Furthermore, Fed’s chair Powell also stated that he does not believe that US economy is in recession, given very strong labor market.
• With such anticipated move from the Fed, it justifies that market showed a little reaction, as all are fully priced-in, at least for July-22 FOMC meeting.
 
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) fell 6 bps to 7.35% on Wednesday (07/27/22).
• The IDR was closed at IDR15,010/USD yesterday weakening from IDR14,993/USD on Tuesday.
• On the other hand, Indonesia’s risk premium 5-year CDS increased to 126,47 bps yesterday (vs 117.47 bps on the previous day).
• APBN recorded a surplus for 6 consecutive months. The fiscal surplus was recorded at IDR73.6 trillion as of Jun-22 (0.39% of GDP).
• Throughout 1H22, the realization of budget financing was reported at IDR153.5tn or 18.3% from target (-63.5% YoY) largely driven by growing government revenue (+48.5% YoY) amidst higher commodity prices.
 
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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