Global Market Update
• US financial markets were closed yesterday (05/30/22), commemorating memorial day.
• However markets focus remain on monetary policy adjustment.
• Fed’s governor Christopher Waller advocated US CB to raise benchmark policy rate by +50 bps every meeting until seeing a substantial reduction in inflation.
• Euro government bond yields jumped to start this week after preliminary data showed inflation is increasing more than expected.
• Germany 10-year bond yield rose +9 bps to 1.05% while UK 10-year bond yield was up +7 bps to 1.99%.
• Given the rising inflationary pressure that become more persistent, ECB is expected to end its negative interest rate environment.
• Money markets are now pricing +110 bps ECB rate increase by the end of FY22F.
• Markets expect ECB to start tightening by raising +50 bps benchmark policy rate in Jul-22.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) decreased 6 bps to 7.01% to start this week (05/30/22).
• The IDR strengthened against USD to IDR 14,557/USD on Monday from IDR14,567/USD last week.
• Indonesia risk premium 5-year CDS continues to fall and was closed at 87.29 bps yesterday.
• The government will conduct an auction of 6 series SBSN (SPN-S 15112022, PBS031, PBS032, PBS030, PBS029, PBS033) with an indicative target of IDR6 trillion today.
• The yield trend has started to decline and market participants' appetite for fixed income instruments has begun to recover. We expect that this SBSN auction will be better than the previous auction.
Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 6.90-7.10% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0044, FR0064, FR0078, FR0054, FR0091, FR0068, FR0072.
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