Company Update

10 November 2023

Fixed Income Report November 10, 2023

Global Market Updates

• Wall Street equities posted contractions Thursday (Nov 9, 2023); DJI slid -0.65%, S&P 500 dropped -0.81% and Nasdaq pushed slipped -0.94% on weak 30-yr UST bond auction and the Fed’s hint of leaving rate hike on the table.
• The UST 10-yr yields bounced back by a staggering 13 bps to 4.62% on the mere sentiment that the Fed might not have ruled out more rate hike as an option to achieve their 2% inflation target. The 2-yr yield also followed with a 10 bps rebound to 5.03%, rendering the 2s10s curve at -41 bps.
• This made the 30-yr UST auction of USD24bn recording tepid demand as investors probably staved off the idea of accruing bonds when the hiking cycle might still persist. The bid-to-cover came in at 2.24, well bellow the 10-acution average of 2.40.
• The US labor market has begun to reveal its cracks; weekly continuing claims rose 22k to 1.83mn vs expectations of 1.82mn.
• Markets still bets on no more rate hikes from the Fed, with the Dec-23 FOMC rate hike probability slightly raised to 12%, and so was the Jan-24 FOMC to a 19% likelihood.
• On the other hand, the JGB 10-yr yields continues to slip, yesterday by 1.9 bps, as BoJ’s Ueda hinted that they are not planning to rush monetary policies. This postpones the risk of UST ownership repatriation for the time being, in our view.

Domestic Market Updates

• Indonesian benchmark series of LCY government were mixed Thursday (Nov 9, 2023), with the 10-yr benchmark yield edging up to 6.80%, leaving the 2s10s curve at 2 bps.
• Foreign flows have continued up to Nov 8, 2023 with an amount of IDR810bn on a day-to-day basis, amounting to IDR2.38tn on a week to date basis. This was accompanied by heavy interventions from BI as we see IDR13.45tn of inflow from BI.
• IDR continued to weaken against the USD (USD/IDR ticked 0.03% to 15,655); attaining new downside risk as China’s CPI in Oct-23 fell -0.2% YoY, below expectations of -0.1% YoY.
• Given the recent market rush into gov’t securities (SBN), the bonds are in our view relatively premium given the situation UST is facing, amid rising issuances and the seemingly tepid demand-side appetite.

Market Forecast

• Given the recent developments that unfolded within the global and domestic markets, we expect the 10-yr Indo GB yield to move within the range of 6.75-6.90% for today.
• Attractive Indo GB series to be traded today : FR0040, FR0081, FR0096, FR0100.

Disclaimer On

FR40 FR81 FR96 FR100

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