30 Oktober 2023
Fixed Income Report October 30, 2023
Global Market Updates
• Wall Street equities closed mixed Friday (Oct 27, 2023); DJI/S&P 500 slid 1.12%/0.48%, undercut by heightening geopolitical risks and JP Morgan’s CEO selloff of Chevron, while Nasdaq saw strength on positive earnings news.
• The Sep-23 core PCE deflator reading Friday showed that inflation was right where the market expected it to be, coming in at 3.7% YoY/0.3% MoM.
• The fear gauge, VIX Index, still hovers above the 20 point mark, creeping up 2.9% to 21.27 Friday. It has risen from 13 in Sep-23, and as long as the geopolitical tensions linger, market’s unease should remain high. Asset classes that should benefit includes gold, which has risen c. 10% MTD, and short-dated gov’t debts.
• Despite signs of resiliency within the economy as depicted by a higher than expected rise of 0.7% in Sep-23 personal spendings data (vs 0.5%), the UST 10-yr yield slid down 2 bps to 4.84%, succumbing to the market’s demand for safe haven over the angst of weekend Middle East escalations.
• Global bonds movement were mixed with the German and UK 10-yr yields slipping 2.9 bps/5.3 bps to 2.83%/4.54%, while the Japanese 10-yr yield edged up 0.6 bps.
• Aside from raising its fiscal deficit ratio, China through its central bank looks to cut its reserve requirement ratio by another 25 bps in Nov-23 - the third time this year - to ease the banking liquidity pressures amid rising selloffs and rising issuance demand.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds mostly rebounded Friday (Oct 27, 2023), with the 10-yr benchmark series yield easing down 2 bps to 7.20%.
• The 2s10s curve bull steepened to 36 bps, with the front end yields dipping stronger, possibly due to decent demand and/or BI’s intervention.
• As of Oct 26, 2023, on a day-to-day basis BI was seen to accrue a considerable IDR8.1tn in gov’t securities ownership, followed by insurance and pension funds (IDR1.1tn) as well as a net inflow from non residents of IDR2.33tn. Domestic banks resumed its disposal of gov’t securities, outflowing as much as IDR10.4tn during the period.
• IDR continued its depreciation against the USD (USD/IDR rose +0.13% to 15,940) and is likely to face further weakening on the still solid USD demand.
• Persisting and renewed geopolitical tensions have contributed to the rates volatility, with the MOVE Index jumping c. 34% from Sep-23 levels, a strong underpinning of fund outflows from EMs.
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 7.10-7.20% for today.
• Attractive Indo GB series to be traded today : FR0040, FR0059, FR0081, FR0100.
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