08 November 2023
Fixed Income Report November 8, 2023
Global Market Updates
• Wall Street equities continued its rally streak Tuesday (Nov 7, 2023); DJI up 0.17%, S&P 500 higher 0.28% and Nasdaq lead the strengthening by 0.90%, carried by positive 3Q earnings and slide in US Treasury yields.
• The UST 10-yr yields tumbled back down by 9 bps to 4.58%, followed by 2-yr yield’s edging down to 4.91%, supported by the good 3-yr UST auction results as well as from a positive carryover’s from UK 10-yr yield’s 10.7 bps fall after BoE openly hinted towards a possible rate pivots by 2H24.
• The UST 3-yr notes auction of USD48bn did unexpectedly well, with the bid-to-cover reaching 2.67 vs 2.56 in the previous auction, with the awarded yield coming in at 4.701% vs the pre-sales level of 4.702%.
• This might be a good indicator for this week’s remaining UST auctions in the 10-yr and 30-yr end of the curve despite rising issuances, at least for now when the euphoric remnants from last week’s rate hold still lingers.
• Another noteworthy factor that plays into the current rally is crude’s easing, now been followed with gold’s downturn (as the two share an increasingly strong correlation of up to 71% within the recent months) despite ongoing geopolitical risks, that has tamed market’s inflation expectations going forward, even shrugging off recent hawkish-leaning Fed comments.
• We see this to be caused by US economy already experiencing a slowdown, subduing the demand for oil. indicated by the sharpest rise of 11.9mn barrels as of Nov 3 since the beginning of 2023, along with a persisting downtrend in ISM manufacturing PMI.
Domestic Market Updates
• Indonesian benchmark series of LCY government posted strong rebounds Tuesday (Nov 7, 2023), with the 10-yr benchmark yield plummeting by 16bps to 6.67%, inversing the 2s10s curve to -5 bps.
• IDR faltered against the USD once again (USD/IDR rebounded +0.59% to 15,538); as DXY rediscovered a bounceback momentum, rising 0.5% since last Friday.
• Yesterday’s issuance of SBSN gov’t securities were welcomed well by investors, successfully garnering a total incoming bid nominal of IDR15.9tn, with IDR7.4tn of the bids aimed at the new SPNS note issuance. The total awarded amount was IDR2.2tn.
• The Oct-23 foreign exchange reserves slid to USD133.1bn from Sep-23’s USD134.9bn, largely to the market’s expectations as the IDR has been under tremendous pressures lately and stabilization interventions was seen to be in order.
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 6.60-6.80% for today.
• Attractive Indo GB series to be traded today : FR0040, FR0081, FR0096, FR0100.
Disclaimer On
FR40
FR81
FR96
FR100
