Global Market Updates
• US Equity Indices continue their decline in unison amid investors’ angst that the Fed and European central banks, in their unrelenting brawl against inflation, might tilt fragile economies towards a recession.
• Though Dallas’s Fed Manufacturing Survey came in at an appalling -23.2, market believes a 2H23 rebound is strongly in order due to the persisting lack of workforce and continued appetite for hiring from service-related for at least the next 6 months, which might just be the recipe for more rate hikes and a flatter yield curve.
• US Treasury notes further declined on Monday as market participants are pricing in their bets for at least one or two hawkish hikes this year.
• The 10-year long-term Treasury yields stood at 3.72%, whereas the yield for 2-year short-term notes plummeted to 4.65%, indicating a yield curve inversion of -0.93%.
• The market is now looking at a 74.4% probability for a rate hike to take place in July’s FOMC meeting (vs 71.9% the previous day).
• Markets have brushed aside Russian rebellion tensions sentiments, as is shown by the short-lived bull in gold last week and a VIX index that remained low in 2 years.
Domestic Market Updates
• The benchmark series of LCY government bond mainly closed higher on Monday (Jun 26, 2023). Indonesia’s benchmark 10-year LCY government bond yield FR0096 was little changed at 6.27%, as was the other benchmark series.
• IDR mainly closed lower against other major currencies, further depreciating against the USD as the IDR loses its steam amid looming hawkish dollar.
• We continue to observe an increment in the Indonesian 5-yr CDS (up +3.59% to 90.56) starting this week, posting its second consecutive week of relentless uptrend. Credit risk tensions continue to stir up as market weighs Bank Indonesia’s (BI) absence of rate hikes as opposed to Fed’s hawkish conviction.
Market Forecast
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 6.20-6.40% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0082, FR0084, FR0087, FR0096.
MNCS Research
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