Global Market Update
• The benchmark 10-year UST note yield declined by 6 bps to 3.20% on Friday (09/02/22).
• Meanwhile the benchmark 2-year UST note yield declined by 11 bps at 3.39% at the same time.
• The spread between 2/10-year UST note yield narrowed to -19 bps from previously -24 bps.
• US stock indices dropped on Friday. DJI and S&P 500 was down 1.07% while Nasdaq Composite loss 1.37% on Friday last week.
• US unemployment rate inched up by 20 bps to 3.7% in Aug-22 (vs 3.5% in the previous month).
• US economy added 315k payrolls in Aug-22, above consensus estimate of 300k, yet significantly lower than previous month figure of 526k in Jul-22.
• Elsewhere, UK’s benchmark government bond yield extended an increase and for the 10 year maturity already hit 2.91% as inflation continued to rise coupled with political uncertainty.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) rose marginally by 2 bps to 7.13% on Friday (09/02/22).
• The IDR weakened against USD and was closed at IDR14,897/USD on Friday (vs IDR18,883/USD on Thursday).
• Indonesia’s 5-year CDS was still above 120 bps and closed at 123.48 bps on Friday last week.
• Government set to increase subsidized fuel price : Pertalite to IDR10,000/L (+31%) & Diesel to IDR6,800 (+32%) on Saturday (03/09/22).
• An increase in subsidized fuel price of 31-32% will provide additional inflation of 2.72 percentage points (ppt) so that it can push FY22E inflation to >6.4%.
• Despite the increase in subsidized fuel prices, the energy subsidy budget burden is still estimated to increase by IDR137-151 trillion by the end of the year.
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 : FR0070, FR0081, FR0086, FR0090, FR0064, FR0082, FR0087, FR0091, FR0096.
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