26 September 2023
Fixed Income Report September 26, 2023
Global Market Updates
• Major global stock indexes was closed mixed Monday (Sep 25, 2023), with US stock indexes managing to rebound despite looming hawkish fears and bearish economic environments and surging yields.
• The 10-yr UST yield jumped by almost 10 bps to 4.53%, while the 2-yr yield was flat at 5.09%. Global bonds caught the risk-off shocks, with the German 10-yr bunds soared 6 bps higher to 2.80%, the UK 10-yr gilt falling 7.4 bps to 4.32%, while the 10-yr JGB eased to 0.74%.
• Aug Dallas Fed manufacturing outlook fell to -18.1, missing expectations of a rise to -14.0.Aug Chicago Fed national activity index also missed expectations of a rebound to 0.1, falling to -0.16 instead.
• Additional concerns stem from risk of a possible US government shutdown as the Congress’s has yet to reach a consensual agreement on fundings to commence the new fiscal year starting Oct 1, 2023. This could potentially leave a huge dent at the country’s economy as several hundreds of thousands would be left without payroll.
• China’s property debt crisis adds to the global risk-off sentiments after news that Evergrande Group had to retreat to their drawing board for their restructuring plan. Without resolution to come soon, the country’s economic growth is at jeopardy, dragging the global growth down with it as well.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds saw lack of trades Monday (Sep 25, 2023). The 10-yr benchmark series yield was muted at 6.74%. The 2s10s Indo GB spread narrowed to 50 bps.
• IDR was closed mixed against global major currencies, continuing its depreciation against the USD (USD/IDR rose 0.16% to 15,400).
• Today’s sharia gov’t securities auction will feature a new short-term note issuance (SPN-S 27032024) along with five reopenings (PBS036, PBS003, PBSG001, PPBS037 and PBS033), with a similar indicative target of IDR6tn as the previous auctions.
• Weighing from the current trend of investors’ disengagement from government securities, we might see lack of bidding activities, possibly pushing the yields higher.
• Throughout the past week up to Sep 22, 2023, Indonesian government securities saw a net inflow of IDR15.8tn, largely contributed from BI’s operations (IDR7.9tn), insurance and pension funds (IDR6tn), mutual funds (IDR2tn) and other entities which constitutes corporations, securities companies and foundations (IDR7tn).
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 6.75-6.85% for today.
• Attractive Indo GB series to be traded today : FR0082, FR0087, FR0096, FR0100.
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