Global Market Updates
• Major global stock indexes closed mixed Thursday (Sep 27, 2023), with US stock indexes garnering some strength back, supported by tech rallies and diminished hawkish prospects from apparent high rates pressures on home sales.
• The 10-yr UST yield soared up to a new 16-year high of 4.61% Wednesday, but edged down to 4.59% Thursday, while the 2-yr yield stood still at 5.04% Thursday.
• Other global bonds followed suit, with the German 10-yr bunds climbing 8.7 bps to 2.93%, the UK 10-yr gilt rocketing 12.6 bps to 4.48%, while the 10-yr JGB gained c. 1.5 bps to 0.76%.
• In line with the expected effects of high rates, US Aug pending home sales continued to plummet 7.1% MoM, far weaker than expectations of a 1% MoM decline.
• The labor market shows signs of weakening though still relatively turgid, with the weekly initial unemployment claims rising 2k to 204k, though still below expectations of 215k, as well as the continuing claims that rose 12k to 1.67mn vs expectations of 1.68mn.
• The markets are discounting a 21% chance of a 25 bps in Nov-23’s FOMC, and a lowered 40% chance in Dec-23’s FOMC. Commencement of rate cuts are still expectedly distant in 2H24 base on the economic projections.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds saw lackluster demand Wednesday (Sep 26, 2023). The 10-yr benchmark series yield edged up to 6.86%. The 2s10s Indo GB spread bear steepened to 59 bps.
• IDR closed mixed against global major currencies, continuing its depreciation against the USD (USD/IDR rose 0.19% to 15,520).
• We foresee domestic gov’t bonds’ yield movement to continue seeing sell-offs given the recent global market developments and global bond trend, and the domestic bonds’ tendency to follow suit.
• The prospect of another rate hike seems to fade at the face of a US government shutdown and clear-cut high rates pressure on home sales as well as cost of funds. On the other hand, surging oil prices that might last a while continues to be a problem for the near-medium term inflation rate, with a still unclear and disparate views from various Fed’s officials.
• Banks’ hands are tied to cater to the rising credit demands in the real sector, such as corporations’ funding demand and automotive credit demands, possibly limiting their liquidity flow to the bond market.
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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