Global Market Update
• US financial market continued to tumble. Yields on US government bond spike 22- 35 bps along the curve to start this week.
• The benchmark 10-year UST note yield jumped 21 bps and was closed at 3.37%, the highest level in a decade.
• Major US stock indices fell. DJI dropped 2.79%, S&P 500 fell 3.88% and Nasdaq Composite came at worst after losing 4.68% of its market cap.
• Given the elevated inflation, markets now expect a more hawkish Fed. Prior to May-22 inflation data release, US CB is expected to raise FFR target by +200 bps in the rest of FOMC meeting this year.
• However, based on CME FedWatch tools, markets are now start to anticipate +300 bps FFR hikes for the last 5 meeting starting from Jun-22.
• Thus the implied FFR target for FY22F would be at 3.75-4.00% by the end of the year.
• Eurozone government bond yield also increased. The 10-year Germany government bond rose 12 bps to 1.63% while 10-year UK government bond yield jumped 8 bps to 2.53%.
Domestic Update
• The benchmark 10-year Indo GB yield (FR0091) rose 15 bps to 7.34% on Monday (06/13/22).
• The IDR weakened against USD and was closed at IDR14,682 yesterday (vs IDR14,553) last week.
• Indonesia risk premium 5-year CDS also rose was closed at 110.02 bps from 100.36 bps last week.
• The government will conduct an auction for 6 series of SBSN: 1 SPN (new issuance) & 5 PBS (reopening) with an indicative target of IDR9 trillion today.
• In the midst of negative external sentiment with the spike in the 10-year UST note yield to the highest level in a decade and the inversion of the yield curve, we expect that investors will tend to wait & see and investor interest in this auction will be limited.
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 7.30-7.50% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0084, FR0090, FR0078, FR0085, FR0054, FR0091.
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