Global Market Update
• The benchmark 10-year note yield decreased 3 bps to 3.53% on Wednesday (09/21/22)
• On the other hand, the 2-year benchmark increased 8 bps to 4.05% at the same time.
• Yield on the benchmark 2-year government bond finally hitting above 4% level.
• Spread between 2/10-year UST note yield was at -52 bps or widening from the previous day position at -41 bps.
• US stock indices continued to fall on Wednesday. All the 3 benchmark indices dropped more than 1.7%.
• Financial market moved responding to Fed’s rate hikes by 75 bps on Sep-22 meeting.
• Despite the rate hike has been anticipated, interestingly, based on FOMC Sep-22 projection, expect FFR to be raised further to 4.4% by the end of 2022. This is 100 bps higher than in Jun-22 projection.
• Furthermore, FOMC also expect that US GDP will grow only 0.2% this year, a 150 bps downgrade from Jun-22 projection.
• On the other hand, FOMC sees PCE inflation could hit 5.4% or 20 bps higher from Jun-22 projection.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR009) increased marginally 1 bps at 7.18% on Wednesday (09/21/22).
• Indonesia’s 5-year CDS finally rose to above 130 bps yesterday and was closed at 130.43 bps.
• However, the IDR continued to depreciate against USD. The IDR was closed at IDR14,997/USD on Wednesday (vs IDR14,984/USD on Tuesday).
• We expect BI to raise 7-day reverse repo rate by 25 bps to 4.00% on Sep-22 meeting.
• The tightening of monetary policy is inevitable since the risk of higher inflation and IDR depreciation linger.
Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 7.10-7.30% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0070, FR0077, FR0081, FR0086, FR0090, FR0064, FR0082, FR0087, FR0091, FR0096.
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