Global Market Updates
• US government bond prices were traded down yesterday as yields increased along the curve on Wednesday (May 24, 2023).
• Yields on US government bond for the long-term 10-year rose 5 bps to 3.75% while the short-term bond yield inched up 6 bps to 4.38%.
• Stock market fell with the DJI and S&P 500 dropped 0.7% while NDX fell 0.6% yesterday.
• The average contract interest rates for 30-year fixed rate mortgages hitting 6.69% on March 19, 2023 pointing the highest level since Mar-23.
• Recent concern related to US debt ceiling negotiations, future monetary policy and rising USD has weakened risky asset pricing sentiments.
• Markets bet on another 25 bps hike of FFR in the upcoming meeting has risen to 34% from previously at 31% according to CME FedWatch.
• Despite the hawkish tone of Fed still lingering and strengthening DXY, BoK maintained its policy rate unchanged and recording 3 consecutive months of a hold action.
Domestic Market Updates
• The benchmark LCY government bond yield for 10-year (FR0096) marginally declined by 1 bps to 6.41% yesterday.
• The IDR has depreciated against USD marginally by 0.07% closed at IDR14,900/USD and at the same time the 5-year CDS stabilized at 90 bps.
• Recently Bank Indonesia (BI) has reported BoP surplus of USD6.5bn in 1Q23 driven by CA surplus of USD3bn and capital and financial account surplus of USD3.4bn.
• Indonesia’s CA surplus narrowed from previous quarter as commodity prices continued to soften, yet it could be offset by capital and financial account surplus due to massive inflows of foreign fund to government bond.
• Overall, the indicators showed a stability in the financial system and we expect BI to hold its reference rates at 5.75% in the upcoming meeting.
Market Forecast
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 6.40-6.55% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0081, FR0090, FR0091, FR0088, FR0093 and FR0062.
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