09 November 2023
Fixed Income Report November 9, 2023
Global Market Updates
• Wall Street equities was closed mixed Wednesday (Nov 8, 2023); DJI slid 0.12%, S&P 500 rose 0.10% and Nasdaq pushed forward by 0.11% on mixed corporate news and results backed by declining yields.
• The UST 10-yr yields fell back down by 9 bps to 4.49%, whilst the 2-yr yield edged up by 2 bps to 4.93%, supported by the positive demand from the UST auction.
• Demand for the UST 10-yr’s USD40bn auction yesterday was decent enough, garnering a bid-to-cover of 2.48 or right on the 10-auction average.
• Markets are now pricing in now more rate hikes from the Fed in the near term, with the Dec-23 FOMC likelihood at 10%, while the Jan-24 FOMC discounted at a 18% chance.
• The European yields also finished lower; UK 10-yr yield slid 3 bps to 4.24%, German 10-yr yield dropped 4.1 bps to 2.62%, backed by weaker-than-expected Sep-23 retail sales in the Eurozone of -0.3% MoM vs -0.2% MoM.
• From Asia, Japanese 10-yr yields continued its slide by 2.7 bps to 0.86%, followed by Chinese 10-yr yield slip to 2.65%.
Domestic Market Updates
• Indonesian benchmark series of LCY government mostly depreciated Wednesday (Nov 8, 2023), with the 10-yr benchmark yield surging by 11.5 bps to 6.79%, lifting the 2s10s curve from an inverted position to 3 bps.
• Despite UST’s bull run the domestic yield rose likely on the back of liquidity redirection towards the AE’s bullish momentum, and likely due to the Tuesday’s inverted yield curve which could have surprised some investors.
• Earlier this week up to Nov 7, 2023, foreign inflows into gov’t securities have been observed, amounting to IDR1.57tn, though overall an outflow of IDR1.2tn was recorded on the back of domestic banks offloading (IDR7.95tn).
• IDR continued to weaken against the USD (USD/IDR rose +0.13% to 15,650); amid a DXY sideways trend since on a week to date basis.
• Yesterday’s auction of SRBI may have reflected the faltering demand for domestic gov’t debt securities; the total awarded bids was lower at IDR3tn vs IDR4tn, and the awarded yields mostly have gone up by 2.3 bps on average.
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 6.70-6.80% for today.
• Attractive Indo GB series to be traded today : FR0040, FR0081, FR0096, FR0100.
Disclaimer On
FR40
FR81
FR96
FR100
