05 Juli 2023
Fixed Income Report July 5, 2023
Global Market Updates
• Wall Street was closed commemorating US Independence Day on Tuesday (Jul 4, 2023).
• As a result, the global stock market saw a relatively light trading activity yesterday.
• The CME Fedwatch consensus remained fixated on a 86.2% probability of a rate hike in to take place in July’s FOMC meeting.
• Markets in Asia will be starting the day with the concerning Chinese Caixin PMI release that came in at 53.9 and 52.5 for the Services and Composite PMIs, falling below market forecasts of 56.5 and 55.1, respectively.
• The Caixin PMI primarily depicts the private sector’s health, and coupled with large amounts of reverse repos maturing in July poised to suck CNY1.8 trillion from the banking sector, this puts more pressure on the Chinese Govt. to intervene sooner, probably using the 7-day reverse repo and medium-term lending facilities before cutting down the RR later in Aug – Sep-23.
• The CNY might be looking towards more downwards correction, having already depreciated -8% YTD against the IDR.
Domestic Market Updates
• The benchmark series of LCY government bonds continued its appreciation spree yesterday (Jul 4, 2023). Indonesia’s benchmark 10-year LCY government bond yield FR0096 slipped by another 3 bps to 6.19%, whereas the longer-termed 15-year yield (FR0098) plummeted by a hefty 11 bps, followed suit by 20-year yield (FR0097) that saw a 10 bps fall.
• The affinity towards longer-term yields was reflected in the further narrowing of the yield curve spread between the benchmark 10-year and 2-year yields that stood at 0.36% or slid 3 bps from the previous day.
• We also observe foreign investors, mutual funds, insurance and pension funds to accrue their positions in the Indonesian government bonds.
• IDR managed to appreciate against other major currencies, including USD as the USD/IDR slid by -0.21% yesterday.
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 : FR0045, FR0067, FR0077, FR0084, FR0087.
