27 September 2023
Fixed Income Report September 27, 2023
Global Market Updates
• Major global stock indexes mostly weakened Tuesday (Sep 26, 2023), with US stock indexes slipping back on bearish economic outlooks, wide-open yields upsides and US government shutdown worries.
• The 10-yr UST yield edged up to 4.54%, while the 2-yr yield garnered attraction from investors, slipping 5 bps to 5.04%.
• Global bonds followed suit, with the German 10-yr bunds rose 1 bps to 2.81%, the UK 10-yr gilt remained flat 4.32%, while the 10-yr JGB gained 0.5 bps to 0.74%.
• In line with the expected effects of high rates, US home sales continued to slip, the latest in Aug-23 by 8.7% to 675k, though deeper than market expectations of 698k.
• Sep-23’s consumer confidence index from the US Conference Board also portrayed declining optimisms in the real sector, falling 5.7 to 103.0 vs expectations of 105.5.
• The markets are discounting a 19% chance of a 25 bps in Nov-23’s FOMC, and a 42% chance in Dec-23’s FOMC. Rate cuts are expected to commence in 2H24 in response to an expected economic slowdown.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds saw lackluster demand Tuesday (Sep 26, 2023). The 10-yr benchmark series yield was soared almost 10 bps to 6.85%. The 2s10s Indo GB spread bear steepened to 56 bps.
• IDR weakened against most global major currencies, continuing its depreciation against the USD (USD/IDR rose 0.58% to 15,490).
• Yesterday’s sharia gov’t securities auction illustrated investors’ averse stance towards fixed income assets. The total incoming bids totaled to IDR27.8tn, lower than the previous auction’s IDR31.3tn.
• Shortening the duration remains to be the theme as the 2-yr PBS036 came in with the highest amount of bids of IDR15tn and a total winning bids of IDR7.8tn.
• As of Sep 27, 2023, Indonesian government securities positions continue to incur sell-offs from the banking sector (-IDR3.4tn DtD/-IDR15.1tn WoW) and non-residents (-IDR2.7tn DtD/-2.9tn WoW), balanced by BI’s operations (IDR5tn DtD/IDR16.5tn WoW).
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 6.80-6.90% for today.
• Attractive Indo GB series to be traded today : FR0082, FR0087, FR0096, FR0100.
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