Company Update

11 September 2023

Fixed Income Report September 11, 2023

Global Market Updates
• Wall Street equities posted mild rebounds in last week’s closing (Sep 8, 2023), widely supported by continued rally in energy stocks as oil sees no end to its rally soon, further bolstered by reassuring echoes of a rate hold to take place in this week’s FOMC meeting.
• The bite from high interest rates have become even more apparent when US July consumer credit reading Friday showed a slowdown of only a USD10.4bn increase vs expectations of USD16bn increase.
• The 10-yr UST notes yield, as a result, slipped 1 bps to 4.26%, while the 2-yr UST notes yield climbed 4 bps and closed at 4.98%, widening the inversed 2s10s yield spread to -72 bps.
• This was possibly due to increased inflation expectations linked from the recent sustained rally in energy prices, as indicated by the jump in 10-yr breakeven yield to 2.34%, its 2-week high.
• Markets are pricing in a 93% probability that September’s FOMC meeting will pass on a rate hike skip, while November’s meeting is still looking at a 50-50 chance of either a hold or hike.

Domestic Market Updates
• Indonesian benchmark series of LCY government bonds mostly rebounded Friday (Sep 8, 2023). The 10-yr benchmark series yield slipped 3 bps to 6.54%.
• The 2s10s Indo GB spread now stands at 34 bps (vs previously 36 bps), or bull flattened.
• For the past few weeks the trend has been that Indo GB’s movement closely follow the US bond market trends.
• We view domestic bond’s to remain subdued with limited upside until the end of year on several fronts such as political year which tends to entail wait-and-see stances, increased inflationary pressures to come from strong energy prices rally, solid growth in credit demand, and food price inflations as a result of El Nino dynamics.
• On Friday, IDR mainly weakened against global major currencies, while staying flat against the USD amid USD’s piggyback ride on crude oil’s bull.

Market Forecast
• Given the recent developments that unfolded within the global and domestic markets, we expect the 10 year Indo GB yield to move within the range of 6.50-6.60% for today.
• Attractive Indo GB series to be traded today : FR0081, FR0082, FR0087, FR0096, FR0100.

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