Company Update

07 Juli 2022

Fixed Income Report July 7, 2022

Global Market Update
• UST note yields jumped 5-17 bps along the curve on Wednesday (07/06/22).
• The benchmark 10-year UST note yield rose 12 bps to 2.93% after the release of FOMC minutes of meeting.
• Based on Fed’s FOMC minutes of meeting last June, US CB stated that to fight against rising inflation another 50-75 bps rate hike is reasonable at the next meeting.
• In addition yield curve of short and long rate also inverted again. The spread between 2-year and 10-year UST note now turned to negative territory.
• Throughout this year, yield curve inversion occurred two times, last night and on Apr-22 previously.
• The phenomenon of yield curve inversion is seen as a good leading indicator that US economy may fall into recession in the upcoming months.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) fell 5 bps 7.25% on Wednesday (07/06/22).
• The IDR weakened against USD and was closed at IDR14,999 yesterday vs IDR14,994 on the previous day. Note that IDR also hit IDR15,000/USD in the intraday trading.
• Indonesia’s risk premium 5-year CDS jumped to 149.25 bps from previously at 145.84 bps.
• We believe that IDR depreciation and jumping risk premium may trigger another yield spike as the Fed also prepare to aggressively tighten again.
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 7.25-7.45% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0081, FR0084, FR0090, FR0047, FR0052, FR0054, FR0091.
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