31 Juli 2023
Fixed Income Report July 31, 2023
Global Market Updates
• Last week’s tumultuous global markets development culminated on Wall Streets and treasuries gains on Friday’s closing; the DJI rose +0.5%, S&P 500 was up +0.99% and Nasdaq soared +1.9%.
• The US long-term 10-year Treasury notes yields fell back -4.8 bps to 3.95%, followed by the short-termed 2-year note that declined 4 bps, leaving the yield curve to remain at -91 bps.
• This was following data releases that showed an increase in US July Michigan Consumer Sentiment (71.6 from vs 64.4 in June) and an on-track cooldown of inflation (Fed’s official inflationary gauge, core PCE Price Index for June, rose by 0.2% vs May’s 0.3% and in-line with consensus of 0.2%).
• The rich seem to be in a good mood for investing – the Michigan consumer sentiment’s top tercile by income saw a gain of 13 points, higher than the average, and if the soft landing narrative is to be contained for the coming months, stocks could see substantial gains from the increased investment appetites.
• Elsewhere, we saw 10-year JGB to surge +11.8 upon their central banks commencement of bond-buying program in an attempt to raise their yields, spilling over to Australia’s 10-year gov’t bond yield to soar +14.4% as Japanese funds housed in Australia most likely encountered a major outflow.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government bonds depreciated Friday (Jul 28, 2023), with the 10-year (FR0096) yield to gain 3.7 bps to 6.26%.
• The 2-year and 10-year yield curve now stands at 25 bps (vs previous day’s/week’s 29 bps/23 bps), whereas against UST 10-year’s yield, the IndoGB 10-year’s spread remained at 221 bps.
• The IDR lost its standing against the USD despite DXY’s weakening, while it strengthened against other major currencies. The USD/IDR jumped +0.63% to IDR15,095.
• As of July 26, the domestic gov’t bond market saw a IDR28.9tn/IDR24.98tn net inflow on a WoW/MTD basis with foreign flows accounting for IDR3.4tn/IDR9.7tn, indicating a steady return of foreign interest in Indonesia’s gov’t bonds.
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 : FR0059, FR0081, FR0082, FR0087, FR0096.
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