Global Market Update
• The benchmark 10-year UST yield was down 2 bps to 2.46% to start this week (03/28/22).
• However UST yield curve inverted, with 5-30 year spread turning into negative territory.
• Historically the inverted yield curve has indicated the sign of economic recession for US, as shorter term interest rate is higher than its longer term.
• Short-end UST yield was up by 2-5 bps while its belly and long-end UST yield declined by 1-3 bps yesterday.
• On a weekly basis, UST yields have risen 15-48 bps after Fed’s Chair Jerome Powell pointed out that US central bank may increase rate more aggressively in the upcoming meeting by 50 bps.
• In addition, Fed’s plan to reduce its balance sheet may also start from May-22, and this further tighten financial condition.
• Albeit the yield curve inversion, US stock market started this week with a positive performance.
• Each of the 3 main equity indexes rose (DJI : +0.27%; S&P 500 : +0.71%; Nasdaq Composite : +1.31%).
Domestic Market Update
• The price of majority IDR denominated government bond was lower on Monday (03/28/22). The benchmark 10-year Indo GB rose 3 bps to 6.71%.
• The IDR value weakened against USD to the level of IDR14,360/USD yesterday (vs IDR14,346/USD previous day).
• Risk premium which is reflected by the 5-year Indo CDS was down from 95.95 to 94.00 bps.
• The Ministry of Finance reported 2022 state budget performance with revenues to reach IDR156 tn; spending IDR127 tn; a surplus of IDR29 tn or 0.16% of GDP; financing realization minus IDR2.98 tn as of Jan-22.
• The increase in state revenue was supported by tax revenues (+65.57% YoY).
• On a net basis, the realization of financing shows that the government has made external debt payments and the repayment of maturity of SBN greater than the new issuance.
Market Projection
• Government is scheduled to conduct auction for 7 series of securities with the indicative target at IDR20-30tn today.
• Given the recent development on global and domestic market, we expect investor appetite to stay low and the 10 year Indo GB yield to keep steady within a range of 6.70-6.80% for today.
• Attractive Indo GB series to be traded today : FR0086, FR0090, FR000064, FR0078, FR0087, FR0091.
Disclaimer On
