Global Market Updates
• Major global stock indexes closed lower Tuesday (Oct 3, 2023), with US stock indexes posting deep corrections. succumbing to the pressures of Treasury yields bear steepening.
• US Treasury yields continued its uprise, nailing down stocks on its way. The 10-yr UST yield rocketed by 12 bps to reach its 16-year highs at 4.81%, followed by the 2-yr yield rising 3 bps to 5.13%. The 2s10s have have now reached -0.34 bps.
• Remarks from the Fed’s Mester and Bostic that painted hawkish pictures going forward, in search of clearer signs waning strength in the economy, leaving options open for a last rate hike in Dec-23.
• This comment came mainly due to the resilience of the labor market as portrayed by the Aug-23 JOLTs Job Openings the far-exceeded expectations (9.61mn vs 8.8mn), despite the recent surge in yields, which the Fed disregards factoring into their rate policies.
• Markets are forecasting the pricing in of high-rates bite on labor markets too early. The VIX Index soared by a hefty 12.3%, indicating a clear shock within markets.
• European global bonds followed suit as ECB reiterated the stance of higher-for-longer, with the German 10-yr bund yield rising 4.6 bps to 2.97%, the UK 10-yr gilt rising 3.4 bps to 4.59%. Japanese 10-yr yields eased down 1 bps as the 10-yr auctions unexpectedly attracted decent demands.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds continued its downturn Tuesday (Oct 3, 2023). The 10-yr benchmark series yield jumped 4.1 bps to break the 7% ceiling. The 2s10s Indo GB spread remained at 68 bps.
• IDR closed mixed against global major currencies, depreciating against the USD (USD/IDR jumped 0.32% to 15,580).
• Yesterday’s government securities (SBN) auction only captured a total incoming bids of IDR22.4, in-line with our expectations of a lower activity (vs previous auction’s IDR28.8tn), accompanied with a lower awarded bids of IDR9.3tn (vs IDR15.8tn).
• On a WoW basis as of Oct 2, 2023 , Indonesian government securities posted a net inflow of IDR34tn. A huge inflow of IDR27.9tn took place in the individual group category, raising their ownership proportion to 7.39% from 6.93%.
• Non-residents’ ownership continued to pour out, posting a net outflow of IDR8.9tn on a WoW basis.
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 7.05-7.10% for today.
• Attractive Indo GB series to be traded today : FR0082, FR0087, FR0096, FR0100.
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