03 Juli 2023
Fixed Income Report July 3, 2023
Global Market Updates
• US Equity Indices congruently strengthened last Friday (Jun 30, 2023) on the back of the encouraging cooling down of inflation despite at the expense of growth and slowed spending.
• The US bonds market might have started to lose its steam after what was a momentuous first-half as their yields jumped last week.
• The 10-year long-term Treasury yields stood at 3.84%, while the yield for 2-year short-term notes that stood at 4.90%, putting the yield curve inversion below the 100 bps mark.
• Jumping from last week’s 71.9% probability, market participants have come into terms with the inevitability of July’s incoming rate hike as reflected by the current 84.9% probability consensus.
• Highlights from the Asian Market came in from China’s fizzling recovery as the NBS PMIs came in weaker than market forecasts.
• Lack of investment and consumer confidence further underpins the need for more government stimuli: the PBoC is set to carry out two more 10 bps key rate cuts in the third and forth quarters, followed by 25 bps cuts for the reserve requirement ratio (RRR) for banks.
Domestic Market Updates
• All benchmark series of LCY government bond closed higher on last Tuesday (Jun 27, 2023), with the long-term yields taking most of the apprecation. Indonesia’s benchmark 10-year LCY government bond yield FR0096 slid by 3 bps to 6.24% and was followed suit by the other benchmark series.
• IDR was closed mixed against other major currencies, but managed to appreciate against the USD as the USD/IDR slid -0.15% last week.
• Ahead of the Eid-al-Adha holidays, the total bids that came into Tuesday’s (Jun 27, 2023) government securities auction nearly halved from that of the previous auction (Jun 13, 2023) at only IDR37.56tn.
• The bidding composition was more mixed, with investors seemingly more attracted towards the shorter-termed series (FR0095 secured the highest winning bids of IDR3.6tn) amid a still blurry economic outlook ahead.
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 6.10-6.30% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0082, FR0084, FR0087, FR0096.
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