Global Market Updates
• A mix trading was seen in US government bond market, by which triggering yield curve to flatten. The short-term rates rise while the long-term rates dropped.
• Yields on US government bond for the long-term 10-year fell 2 bps to 3.80% while the short-term bond yield increased 3 bps to 4.56% on Friday (May 26, 2023).
• Despite the flattening yield curve, US stock market were traded up on the last trading day in the previous week.
• Most of benchmark equity indices appreciated more than 1% with the NDX led the gain after jumping 2.19% in a day.
• Higher than expected PCE inflation on Apr-23 has triggered market expectation that Fed would deliver another 25 bps hike in Jun-23 FOMC meeting.
• Based on the latest CME FedWatch tools, there is 60.7% probability of FFR to be raised to 5.25-5.50% from 5.00-5.25% now.
• The probability of rate hike has risen after Fed preferred inflation gauge of PCE rose 0.4% MoM in Apr-23 beating 0.3% MoM of consensus estimate.
• However, the progressive of debt ceiling negotiation between President Joe Biden and Republican leader of Kevin McCarthy put hope that the largest economy in the world would avert defaulting.
Domestic Market Updates
• The benchmark LCY government bond yield for 10-year (FR0096) was flat at 6.41% on Friday (May 26, 2023).
• The IDR has depreciated against USD and other currencies. It was traded and closed at IDR14,955/USD and approaching IDR15,000/USD psychological level. Indonesia’s 5-year CDS remained stable at 92 bps on the last trading day of previous week.
• Bank Indonesia (BI) reported net foreign selling in the government bond amounted at IDR0.76tn during May 22-25.
• Net foreign selling pressure was considered to be relatively small and thus could not affect government bond price substantially.
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 : FR0090, FR0054, FR0091, FR0096 and FR0062.
MNCS Research
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