Global Market Update
• The benchmark 10-year UST yield was closed 2 bps lower to 2.17% on Thursday (03/17/22).
• In Mar-22 meeting, the Fed finally decided to increase FFR by 25 bps marking the first hike in the last 3 years.
• US central bank also pointed out that it will reduce its USD9tn balance sheet that could start in May-22.
• Fed’s Chair Powell also said that any reduction in central bank’s balance sheet could be equivalent of another rate hike this year.
• The FOMC has made some adjustment on its quarterly forecast. The committee increased its inflation projection in Mar-22.
• US PCE and core PCE was projected to increase by 4.3% and 4.1% respectively in 2022.
• The forecast figures were higher than Dec-21 projection with PCE is expected to rise by 2.6% while core PCE to increase 2.7%.
• The Fed also changed its GDP outlook from 4.0% in Dec-21 to only 2.8% in Mar22 projection, implying 120 bps cut due to higher inflation.
• On the data front, US Labor Department reported the initial jobless claims filed last week totaled 214,000 marking better actual result than consensus estimate at 220,000.
• In other economic data, US housing starts totaled 1.77 million, higher than estimate of 1.70 million, while housing permits also came higher and beating the estimate to 1.86 million.
Domestic Market Update
• The 10-year Indo GB yield declined 4 bps to 6.71% on Thursday (03/17/22).
• The IDR value marginally strengthened against USD to the level of IDR14,303/USD yesterday (vs IDR14,312/USD in the previous day).
• Risk premium which is reflected by the 5-year Indo CDS was down from 106.40 bps to 92.86 bps.
• The gradual increase in rupiah reserve requirement starting from March 1, 2022 has sapped out IDR55tn banking liquidity according to BI.
• We estimated by the end of 2022, the increase in rupiah reserve requirement will reduce banking liquidity by around IDR185-200tn. However given LDR is hovering around 80%, we think banking capacity to lend will not be affected significantly as liquidity to remain ample.
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 6.70-6.80% for today.
• Attractive Indo GB series to be traded today : FR0090, FR0064, FR0078, FR0087 and FR0091.
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