Global Market Update
• The benchmark 10-year UST note yield was relatively flat at 4.00% on Monday (10/18/22).
• On the other hand, the benchmark for short term rate of 2-year maturity dropped 7 bps to 4.43% at the same time.
• Yield curve inversion narrowed and the spread of 2/10 year benchmark stood at - 43 bps (vs -48 bps last week).
• US equity indices extended gain on Tuesday. The DJI was up 1.12%; S&P 500 rose 1,16% and Nasdaq Composite increased 0.90%.
• Germany’s ZEW Indicator of Economic Sentiment rose slightly to -59.2 in Oct-22 (vs -61.9 in Sep-22), yet more than 60% of surveyed analysts still have a negative outlook on the economy over the next six months.
• Consensus projected that UK inflation will hit 10% YoY in Sep-22 (vs 9.9% YoY in Aug-22).
• Given the inflationary pressure to remain high, thus BOE can be expected to tighten their monetary policy.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) was relatively flat at 7.41% on Tuesday (10/18/22).
• Indonesia’s CDS was relatively flat but domestic currency IDR still depreciating against USD.
• Indonesia’s 5-year CDS stood at 152,81 bps yesterday (vs 159,16 bps on previous day).
• The IDR strengthened against USD and was closed at IDR15,468/USD on Monday (vs IDR15,488/USD last day).
• Government has issued SBSN worth of IDR1.9tn in yesterday’s auction, lower than indicative target at IDR5tn as global yield spike hinder investors appetite.
• BI reported an increase in credit demand by corporations and households reflected by the Net Weighted Balance amounting 56,8% in the latest banking survey.
• Given recent banking conditions, with ample liquidity and rising credit demand, inflation can be expected to rise and therefore followed by BI’s decision to raise interest rates.
Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 7.25-7.45% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0081, FR0095, FR0052, FR0073, FR0054, FR0091, FR0096.
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