27 November 2023
Fixed Income Report November 27, 2023
Global Market Updates
• Wall Street equities settled mixed in a holiday-shortened session Friday (Nov 24, 2023), DJI climbed +0.33%, S&P 500 rose +0.06%, and Nasdaq closed down -0.11%. Stocks were mixed on Friday’s US economic news, after S&P reported that November's US manufacturing activity lower more than anticipated, while service activity in November expanded more than expected.
• The reports indicated that Manufacturing PMI declined from 50 Oct-23 to 49.4 in Nov-23, conversely services PMI improved from 50.6 in Oct-23 to 50.8 in Nov-23.
• US Treasury 10-yr yields rose 0.05 bps to 4.47%, followed by shorter-termed UST 2-yr yield that climbed 0.04 bps to 4.95%.
• Yields pushed higher on a negative aftermath from an increase in the 10-yr German bund yield on reports that Germany will suspend a constitutional limit on net new borrowing for a fourth consecutive year, which could potentially boost supply pressures.
• USD remained stable last week following its first consecutive weekly decline since Jul-23, US economy is predicted to have a soft landing, and this low volatility is encouraging portfolio capital flows into emerging markets.
• Nov-23 Japan national CPI grew +3.3% in Oct, accelerating from the +3.0% in the prior month, the inflationary conditions still remained largely elevated in the country. This trend goes against the BOJ's predictions, which anticipated a decrease in price pressures by the end of the year.
• Global bond yields Friday mainly climbed ; the German bund 10-yr yield hiked +2.5 bps to 2.64%, the UK gilt 10-yr yield climbed +2.6 bps to 4.28%. The Japanese GB 10-yr yield closed up by +2.40 bps to 0.75%.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds closed lower Friday (Nov 24, 2023), as the 10-yr benchmark yield edged up 0.68 bps to 6.63%.
• IDR weakened against the USD (USD/IDR rose +0.06% to 15,565) Friday, following BI’s decision to hold interest rates. On the other hand DXY weakened to 103.72 from Friday's position of 103.93.
• In Friday’s Indo GB series trading, FR96, FR68, and PBS36 dominated the bond market in terms of volume traded, with FR89 and FR91 emerging as the most actively traded, at 125x and 133x respectively.
• State budget (APBN) finally started to record a deficit in Oct-23, reaching 700bn or equivalent to 0.003% of GDP. While non-tax state revenue (PNBP) has reached IDR2,240.1tn as of Oct-23, or 90.9% of the target, we anticipate an increase in spending as the year progresses.
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 6.55-6.70% for today.
• Attractive Indo GB series to be traded today : FR0040, FR0081, FR0096, FR0100.
Disclaimer On
FR40
FR81
FR96
FR100
