05 Oktober 2023
Fixed Income Report October 5, 2023
Global Market Updates
• Major global stock indexes closed mixed Wednesday (Oct 4, 2023), with US stock indexes rebounding in response to yields’ climbing spree halt after the Sep-23 labor market data showed hints of loosening.
• The 10-yr UST yield slipped 8 bps back to 4.73%, followed by the 2-yr yield plummeting by 10 bps down to 5.05%. The VIX Index initially saw a spike of 1.5% to 20.08, before subsiding back by 6.1% down to 18.58.
• The ADP employment reading for Sep-23 showed the huge disparity in the actual additions in job openings (89k) than what the market expected it to be (150k), the weakest rise since 2021.
• Asian equity indexes weakened yesterday following Tuesday’s Wall Street shock, accompanied by shock sell-offs in the fixed income market.
• The Japanese 10-yr jumped 4.2bps, the biggest jump this year, most probably fromt he shock as well as Yen interventions by the BoJ. Asian EM markets also took a huge battering, with Malaysian and Thai 10-yr yields soaring by c. 8 bps.
• If the Fed follows along with the narrative that interest rates have begun to effectively bite into the labor market, then we might see no more hikes in Dec-23, and we might see the UST to remain below 5.00%.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds continued its downturn Wednesday (Oct 4, 2023). The 10-yr benchmark series yield jumped 7.9 bps to reach 7.08%. The 2s10s Indo GB spread up ticked to 69 bps.
• IDR weakened against most global major currencies, depreciating against the USD (USD/IDR jumped 0.33% to 15,632).
• We still expect subsided activity in the fixed income market due to investor’s risk off stances, but the encouraging US labor data yesterday might give enough incentive for a turn-around in yields, as investors had been anticipating the peak. This was clearly reflected in the accumulation of SBNs in the past week by individual investors, pension and insurance funds.
• Additionally, BI has the option to intervene whenever they see fit, but they are likely to let the yields some upper leeway as to provide an attractive spread against the UST and uprising JGB.
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 7.00-7.15% for today.
• Attractive Indo GB series to be traded today : FR0082, FR0087, FR0096, FR0100.
Disclaimer On
