Global Market Update
• US inflation rose 1.0% MoM/8.6% YoY in May-22, higher above consensus estimate.
• Annual rates of inflation in US hit the highest level since Dec-81. Higher actual inflation rates triggered spike in UST note yields.
• The Fed is expected to raise FFR target by 50 bps this week on the back of rising inflation.
• The short term maturity of 2-year UST note yield hit above 3%. Meanwhile the benchmark 10-year UST note yield increased 12 bps to 3.16%.
• Rising UST note yields caused major US stock indexes to fall. DJI dropped 2.73%; S&P 500 fell 2.91% and Nasdaq Composite came at worst which declined 3.52%.
• The BoE thinks inflation is set to surpass 10% later in 2022 and markets now expect the central bank to take rate at 1.25%, the highest level since Jan-09.
• Global investors started to selling bond last week after previously purchasing it.
• According to Reuters data, investors have pulled USD9.46bn out of global bond fund last week after purchases of USD 7.20bn in the previous week.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) rose 1 bps to 7.18% on Friday (06/10/22).
• The IDR strengthened against USD and was closed at IDR14,553 yesterday (vs IDR14,567) previously.
• Indonesia risk premium 5-year CDS also rose was closed at 100.36 bps from 92.95 bps in the previous day.
• BI recorded a net foreign sell on the SBN market of IDR 0.99 trillion and a net buy on the stock market of IDR 1.50 trillion last week.
• Outflows in the SBN market continued throughout 2022 to coincide with the trend of rising global benchmark interest rates.
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 7.05-7.25% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0084, FR0090, FR0078, FR0085, FR0054, FR0091.
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