Company Update

06 September 2023

Fixed Income Report September 6, 2023

Global Market Updates
• US equity indexes lacked any significant drive Tuesday, induced by weaker-than-expected economic data readings coming from China and the Euro Area which in turn gave risk-off sentiments for asset holders.
• China’s August Caixin services PMI fell -2.3 to 8-month low of 51.8 (vs forecasts of 53.5), whereas the Eurozone Aug composite PMI was evised downwards to 46.7 from 47.
• Several US economic data releases yesterday further supported the case for rate holds to be the Fed’s next move: July factory orders slipped -2.1% MoM, marking the biggest fall in 8 months.
• Market participants are pricing in the likelihood of rate pauses ahead (93%, 61.9% and 59.5% probability of rate holds in Sep, Nov and Dec-23 FOMC meetings), echoed by Fed’s Waller wait-and-see stance.
• The 10-yr UST notes climbing 8.7 bps to finish at 4.27%. The 2-yr UST notes followed suit by jumping c. 7 bps and closed at 4.94%, rendering the 2s10s yield spread at -64 bps.
• Global bond yields overall closed higher Tuesday, with UK’s 10-yr gilt rising 6.2 bps to 4.52%, Germany’s 10-yr bund gaining 3.3 bps to 2.61% and Japan’s 10-yr GB jumping 1.4 bps to 0.66% as weak demands was showcased in the 10-yr bond auction.

Domestic Market Updates
• Indonesian benchmark series of LCY government bonds mostly closed lower Tuesday (Sep 5, 2023). The 10-yr benchmark series yield shot up 6 bps to 6.42%.
• The government securities auction yesterday fell short of our expectations, securing a total bid of only IDR20tn (vs last auction’s IDR34.6tn), concurrent with sizable foreign net outflows recorded the day before (Sep 4, 2023) amounting to IDR1.26tn.
• The new 10-yr benchmark candidate (FR0100) secured the most bids/awarded bids of IDR9tn/IDR5.8tn.
• IDR closed mixed against world major currencies, depreciating against the USD (USD/IDR edged up 0.16%).

Market Forecast
• Given the recent developments that unfolded within the global and domestic markets, we expect the 10 year Indo GB yield to move within the range of 6.40-6.50% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0082, FR0087, FR0096, FR0100.

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