06 Oktober 2023
Fixed Income Report October 6, 2023
Global Market Updates
• Major global stock indexes closed mixed Thursday (Oct 5, 2023), with US stock indexes edging downwards as investors await clearer signs of where the economy is headed by observing today’s US employment data.
• The 10-yr UST yield slipped further to 4.72%, followed by the 2-yr yield easing down by 2 bps to 5.03%. Yields’ downhill run was halted after the weekly Initial and Continuing Jobless Claims reflected a persisting strength in the US labor market, coming in at 207k and 1,664k, respectively, missing the market’s consensus of 210k and 1,657k.
• The market is now on stand-by whilst expecting two critical data today: 1) the Sep-23 Non Farm Payrolls which market anticipates to cool-down to 170k after rising 187k in Aug-23, and the 2) Sep-23 Unemployment Rate which by now is expected to incur damage and uptick to 3.8% from 3.7%.
• Those two data will probably be the determining factor for where yields might go from here – as Fed’s Daly stated – and so if they are aligned with the expectations that companies are indeed slowing down their hiring, we might see 10-yr UST to ease down to 4.5%, with global yields to probably follow the trend.
• On the flip side, a persisting tight labor market might induce another wave of bond sell-offs, possibly towards 5.00% and a hoarding towards USD.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds rebounded Thursday (Oct 5, 2023), on the back of seemingly encouraging US economic data. The 10-yr benchmark series yield eased 4.8 bps to 7.03%. The 2s10s Indo GB spread bull flattened to 60 bps.
• IDR strengthened against most global major currencies, cancelling some of the losses against USD (USD/IDR slipped 0.11% to 15,615).
• This week leading up to Oct 4, 2023, the Indonesian gov’t securities posted a week-to-date net outflow of IDR1.2tn, with continued outflows from the nonresident segment observed, amounting to IDR1.2tn. This was coupled with a subdued volume of flows in total, reflecting the investor’s wait-and-see behaviour.
• Whilst on a week-on-week basis a net inflow of IDR7.53 was seen, domestic individual investors and funds seem to be betting for the turnaround to occur soon. If the labor data readings today point to a loosening, its likely yields may slide lower to the 6.8-6.9% range.
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 6.95-7.05% for today.
• Attractive Indo GB series to be traded today : FR0082, FR0087, FR0096, FR0100.
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