10 Oktober 2023
Fixed Income Report October 10, 2023
Global Market Updates
• On Monday a harmonious dovish tone was projected by Fed officials, taking into consideration that the recent term premium surges should prove to be enough to work in favor of the Fed and deem unnecessary any further rate hikes.
• The markets sang along, posting a rebounds on equities after an initial slump on geopolitical tension angsts, with noticeable gains in the energy sector and defensive sectors. VIX index had risen 9.3% to 19.07 before the Fed’s lullaby tamed it down a notch to 17.70.
• Taking into consideration the geopolitical uncertainties ahead, bringing along disruption risks to the commodities market, many market participants now expect the Fed to hold the rates in Dec-23 (65% probability) and leave the rates untouched until 2H24.
• The US Treasury market was closed yesterday commemorating the Columbus Day. Through the cash markets reopening the 10-yr yields were seen to plummet as much as 18 bps to 4.62%, followed by the 5-yr yields fall of 16 bps to 4.93%.
• Global yields lost steam on the back of dovish Fed comments, with the German 10-yr bund yield easing down by 11.2 bps to 2.77%, the UK 10-yr gilt yield falling 9.7 bps to 4.48% while the Japanese 10-yr GB remained flat at 0.81%.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds saw muted gains Monday (Oct 9, 2023), following encouraging UST yield trends. The 10-yr benchmark series yield remained flat at 7.00%. The 2s10s Indo GB spread stood muted at 60 bps.
• IDR weakened against most global major currencies, depreciating against the USD (USD/IDR jumped 0.51% to 15,690).
• Government held SBRI auction (6 Oct) with a total nominal awarded at IDR 11.2tn, increased compared to the previous 2 auctions. This represent investor are becoming more confident in Indonesia’s economic outlook.
• The government also hold SBSN auction today with a total indicative target at IDR9tn. We expect the investor demand remain high by foresee the total bids in the last auction successfully exceed the target.
• Fed’s congregated dovish stance yesterday can bolster the domestic bond performance today, including the SBSN auction to be held 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 6.80-6.90% for today.
• Attractive Indo GB series to be traded today : FR0082, FR0087, FR0096, FR0100.
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