17 Oktober 2023
Fixed Income Report October 17, 2023
Global Market Updates
• US equity indexes closed in the green Monday (Oct 16, 2023), after escalation prospects in the Israel-Hamas clash was tamed down by diplomatic efforts from President Biden's direct visit to Israel. Market participants had been eager to take part in the equity markets from what is expected to be an encouraging Q3 earnings season, despite yesterday's 10-yr yield jump by 9 bps.
• The US Oct Empire manufacturing survey showed a stronger condition than was expected, falling shallower to -4.6 as instead of -6.0, weighing on the UST 10-yr yields that climbed back to 4.71%, followed by 2-yr yields rising 5 bps to 5.09%.
• A rates outlook tug-of-war persisted starting the week; we've seen dovish statements from Fed's Harker, advocating that small firms are already in distress and current rate levels are already sufficient to quell inflation. From the other corner we see hawkish remarks from Treasury Secretary Yellen to leave the market uncertain.
• We do believe that yields are to fluctuate within the current high levels and assist the Fed's QT campaign, in which case the no-more-hikes narrative that markets are pricing in are the most likely scenario.
• The PBoC has deployed another wave of stimulus into the country's finances through medium-term lending facility yesterday, amounting to CNY289bn (USD39.6bn), to provide liquidity boost, amid declining loan growth.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds movements were mixed Monday (Oct 16, 2023) with the front-end yield bear flattening. The 10-yr benchmark series yield stood flat at 6.76%.
• IDR weakened against USD and other global major currencies (USD/IDR rebounded 0.24% to 15,720), despite better-than-expected trade balance performance.
• Today's Indonesian gov't securities auction will feature two new SPN issuances (SPN03240117 and SPN12241017), and reopenings of the LCY gov't benchmark series, with an indicative and maximum target similar to the previous auction at IDR19tn and IDR18.5tn, respectively.
• With the peak of policy rates hikes becoming more apparent, we anticipate markets to respond well to the auction and incite a considerable amount of bids as the last auction (c. IDR20-22tn), with the 10-yr benchmark to be the main spectacle.
• On a WtD basis up to Oct 13, 2023, Indonesian gov't securities posted a net inflow of IDR8.0tn, with the banking sector accruing IDR19.1tn over that period, followed by corporations and securities companies (IDR6.7tn).
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, FR0059, FR0081, FR0100.
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