16 November 2023
Fixed Income Report November 16, 2023
Global Market Updates
• Wall Street equities’ gained Wednesday (Nov 15, 2023), DJI surged +0.47%, S&P 500 went up +0.16%, and Nasdaq climbed +0.03%. The market’s view is still positive due to speculations of rate hikes are over, while higher bond yields limited the upward momentum.
• US Treasury 10-yr yields leaped by 9 bps, landing at 4.53%. The shorter-termed UST 2-yr yields followed suit, jumping by 10 bps to 4.90%. Yields rose on the back of mixed economic news coupled with liquidity preesures from Tuesday’s sharp rally.
• US PPI in Oct-23 was slower than market expectations of 1,9% YoY, easing to 1.3% YoY. At the same time, Oct-23 retail sales only declined by -0.1% MoM vs expectations of -0.3% MoM. These positive data supported the stock indexes to continue its uptrend.
• On the other hand, the Fed’s Daly has remarked the need to maintain restrictive policy in order to guarantee a 2% inflation rate. This was perceived by the market as a negative sentiment.
• Market participants now has fully priced in the Fed to no longer conduct rate hikes, according to CME Fedwatch, with a 100% probability of a rate hold in Dec-23 and Jan-23 FOMC meeting. They anticipate rate cuts to begin as soon as May-24’s FOMC.
• Global bond yields also closed higher; the German bund 10-yr yield finished 4.4 bps higher to 2.64%, the UK gilt 10-yr yield jumped 7.5 bps to 4.23%. Meanwhile, the Japanese GB 10-yr yield fell by 6 bps to 0.80%.
Domestic Market Updates
• Indonesian benchmark series of LCY government mostly settled higher Wednesday (Nov 15, 2023), with the 10-yr benchmark yield slightly rising by 1 bps to 6.94%.
• IDR closed stronger against the USD (USD/IDR rose 1.02% to 15,535) Wednesday; supported by yesterday’s Oct-23 balance of trade data of USD3.48bn, higher than the expected USD3.0bn. This was due to an improved export performance and provided positive sentiment for the IDR.
• Yesterday’s SRBI auction succcesfully garnered a total of IDR7tn, higher than the previous week of IDR3tn. This was accompanied by a lower weighted average bidding rate of 6,90% vs preivous week’s 6.95%.
• This may indicate that demand for SBN-backed assets such as SRBI has revived, supported by conducive US macro developments, which we see may continue onwards today.
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
