Global Market Update
• Yields on UST note dropped 3-7 bps along the curve on Friday (05/20/22). US government bond yields have fallen 1-15 bps along the curve on a weekly basis.
• The benchmark 10-year UST note yield was closed at 2.81% or 4 bps lower from previous trading day.
• However, yield on the benchmark government bond has dropped 15 bps from the previous week.
• Investors favor safe haven assets such as government bond during stock market sell off.
• US equity market fell into bearish zone. On a weekly basis, DJI was down - 2.98%; S&P 500 fell -2.66% and Nasdaq Composite dropped -2.64%.
• Tightening monetary policy remains the dominant sentiment which trigger risky asset sell off.
• The probability of FFR target at 2.75-3.00% in Dec-22 is now at 50%, indicating that US CB will be more aggressive in tightening in the coming meeting.
Domestic Market Update
• Yield on 10-year Indo GB was closed at 7.23% on Friday (05/20/22), in line with our expectation.
• The IDR strengthened against USD to IDR14,652/USD from IDR14,733/USD on the previous day.
• Indonesia 5-year CDS was closed at 112.50 bps last week.
• On the data front, BI reported Indonesia’s CA booked a surplus of USD221mn +0.07% GDP) in 1Q22 & BoP posted a deficit of –USD1.70bn at the same time.
• The focus of market participants this week is the Board of Governors Meeting (RDG) of Bank Indonesia (BI). Consensus estimates that the BI 7 Day Reverse Repo Rate will be maintained at 3.5%
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 move within a range of 7.10-7.30% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0064, FR0078, FR0091, FR0068, FR0072.
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