Global Market Update
• Majority of UST note yields fell to start this week. Yields declined by 1-6 bps along the curve.
• The benchmark 10-year UST note yield fell 5 bps to 2.89% on Monday (05/16/22).
• Yields on US government bond also decreased 3-17 bps along the curve on a weekly basis.
• US equity market was mixed yesterday. DJI was up 0.08%, while S&P 500 and Nasdaq Composite lost 0.39% and 1.20% respectively.
• Equity market drawdowns coupled with decreasing UST note yield may indicate that market is now concern of potential slowing economic activity due to ongoing war between Russia Ukraine, high inflation as well as Chinese Covid-19 situation.
• Inflation in Europe has hit 7.5% YoY in Apr-22, hitting a multi decade high and ECB is expected to tighten soon.
• ECB asset purchase program is expected to end by Jul-22 and will be followed with a 25 bps hike in a deposit rate a few weeks later.
Domestic Market Update
• Yield on 10-year Indo GB stayed at 6.36% last week.
• The IDR also weakened against USD and was closed to IDR 14.613/USD, the lowest in a year.
• However, Indonesia 5-year CDS fell to 115,10 bps from 127,85 bps. Government bond market has experienced a high volatility during the first week of trading in May-22.
• We think that rising Indo GB yields was driven by Fed’s hike on FFR by 50 bps on the previous week.
Market Projection
• Given the recent development on global and domestic market and after a high yield spike, we expect the 10 year Indo GB yield to keep steady within a range of 7.20-7.40% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0090, FR0073, FR0091, FR0068, FR0072.
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