03 November 2023
Fixed Income Report November 3, 2023
Global Market Updates
• Wall street equity indexes continued to strengthen on the belief that further Fed rate hikes are now on the rear-view mirror, pushing Nasdaq by 1.74%, S&P 500 by 1.89% and DJI by 1.70%.
• Positive earnings results also contributed to the conducive run to equities, pulling down the fear gauge, VIX, by 7.2% to 15.66.
• The UST 10-yr yield dived down by 10 bps, widening the inverted curve back to -31 bps as the 2-yr yield stood flat at 4.98%.
• Global bonds mainly strengthened, trailing most of the macro developments in the US; with German 10-yr yields falling 4.7 bps to 2.72%, the UK 10-yr yield to fall 11.7 bps to 4.38%.
• The weaker-than-expected labor market was welcomed by the market; yesterday’s weekly initial unemployment claims rose to 217k instead of the anticipated 210k, followed by the continuing claims that rose 1.82mn as opposed to 1.80mn. A pro-dovish development of a weaker than expected 3Q unit labor cost (-0.8% vs the expected -0.3%) also supported yesterday’s market rally.
• The BoE’s restrictive rate hold at 5.25% in yesterday’s board of governors meeting came out as officials maintain a higher for longer strategy whilst weighing if current rates are sufficient.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds further strengthened Wednesday (Nov 2, 2023), with the 10-yr benchmark series yield edging down to 7.05%.
• IDR reclaimed its footing against the USD (USD/IDR slipped -0.49% to 15,857); DXY’s momentum further slowed as the UST fever had resumed once again.
• Asian regional bond market, both developed and emerging markets, also saw demand rejuvenation as jitters cooled off; the 10-yr JGB yield slipped 3.5 bps, China’s 10-yr yield following by 2.9 bps, Malaysia’s 10-yr yield dropping 94 bps and the Thai 10-yr to follow suit by 2.7 bps.
• The Indonesian gov’t securities have once again started to record net foreign inflows, amounting to IDR2.9tn during this week leading up to Nov 1, 2023. We view this to be a positive indicator that investors have reconciled their risk-on appetite towards the attractively valued EM yields.
• The 5-yr CDS cooldown by 5.3% down to 91.54 reflects the market’s sigh of relief, we are poised to see consolidation in the bond and equities continue 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 6.95-7.05% for today.
• Attractive Indo GB series to be traded today : FR0040, FR0059, FR0081, FR0096, FR0100.
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