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RESEARCH

Company Update

30 September 2022

Fixed Income Report September 30, 2022

Global Market Update
• The benchmark 10-year note yield increased 5 bps to 3.78% on Thursday (09/29/22).
• On the other hand, the 2-year benchmark yield gained 7 bps to 4.20% at the same time.
• Spread between 2/10-year UST note yield was at -42 bps, widening from the previous day position at -40 bps.
• The USD index fell to 111.89 after hitting its peak this year at 114.00, whilst, oil price continued to drop amidst unfavorable macro environment.
• The brent crude future price has been traded consistently below USD90/bbl 23 September 2022.
• Oil prices have declined more than 30% from its peak this year, yet on average brent crude price stayed high at USD102.53/bbl.
• Following the rise in the risk free rate, US stock market tumbled erasing its gain from the previous day’s rebound.
• All the 3 major indices for US equity market dipped more than 1% (DJI -1.54%; S&P 500 -2.11%; Nasdaq Composite -2.84%).
 
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) stayed at 7.39% on Thursday (09/29/22).
• Indonesia’s 5-year CDS remained above 160 bps yesterday. The risk premium rose to 166.18 bps.
• The IDR remained above 15,260.USD and was closed at IDR15,263/USD yesterday.
• Since BI decided to increase the benchmark interest rate, IndONIA's interest rate rose 28 bps to 3.83% and the 1-week JIBOR rate rose 46 bps to 4.52%.
• We view that the increase in money market interest rates reflects the ongoing transmission of monetary policy.
• Currently, there is sufficient liquidity in the banking system. However, with the increase in Statutory Reserves and an rising loan demand, we estimate that loan interest rates will begin to increase 3-6 months after the benchmark interest rate hike (1Q23).
 
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 7.25-7.45% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0070, FR0077, FR0081, FR0090, FR0064, FR0095, FR0082, FR0087, FR0091, FR0096.
 
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