Global Market Update
• Yields on UST note were traded higher to start this week (05/23/22) . Yield curve rose 2-9 bps from the last position on Friday (05/20/22).
• The benchmark 10-year UST note yield increased 8 bps to 2.86%, still 2 bps lower than a week ago.
• US government bond moved in the opposite direction to equity. US stock market rebounded to start this week.
• All the 3 US equity benchmark indexes moved >1,5% higher than the last closing position last week.
• Eurozone government bond yield also increased after ECB President Christine Lagarde made a comment on the path of CB interest rates in the coming months.
• Lagarde said that ECB is likely to exit negative interest rates by the end of 3Q22.
• Markets now see +110 basis points of rate hikes for FY22F, more than a quarter of a percentage point at each of the ECB's policy meetings from July.
Domestic Market Update
• The benchmark 10-year Indo GB yield started lower at 7.16% in the beginning of this week (05/23/22).
• The IDR weakened against USD to IDR14,674/USD from IDR14,652/USD on the previous day.
• Indonesia 5-year CDS was closed at 122.60 bps yesterday rising from 112.50 on the previous day.
• As of Apr-22, the government recorded a budget surplus of IDR103.1tn (+0.58% of GDP). The surplus was driven by an increase in state income +45.9% YoY.
• The budget surplus makes the debt outlook and SBN issuance lower for FY22F which should be positive catalyst for government bond prices, yet aggressive tightening put another downside risk.
Market Projection
• We expect BI to maintain its benchmark interest rate steady at 3.5% as core CPI remains in-line with ITF and the needs to support growth.
• 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, FR0084, FR0064, FR0078, FR0091, FR0068, FR0072.
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