Global Market Update
• The 10 year U.S. treasury yield closed steady at 1.26% on Tuesday (08/17/21) ahead of the Fed minutes of meeting that due on Wednesday and as recent data release was disappointing
• The University of Michigan's consumer sentiment for the U.S. slumped to 70.2 in August-21. It was the lowest reading since December-11 and causing yield to fall to start this week. At the time yield gave up 3.5 bps
• U.S. retail sales declined 1.1% on monthly basis in July-21 yet still managing a double digits positive growth of 15.8% compared to the same period last year. Both figures remained below actual growth in the previous month.
• China disappointing economic data recently as reflected on its industrial production that only grew 6.4% YoY in July-21 vs 8.3% YoY in the previous month also pushed yield lower.
• U.S. equity market snapped its gain last night. DJI dropped 0.79%; S&P 500 declined 0.70% and Nasdaq Composite ended 0.93% lower.
Domestic Market Update
• Before national holiday commemorating the independence day, 10 year Indo GB yield closed 4 bps lower to 6.33% on Monday (08/16/21). This is in line with U.S treasury yield decline.
• According to 2022 draft state budget published on Monday, Indonesia’s economy is expected to grow 5.0-5.5% in 2022, while budget deficit is set to be at 4.85% GDP meaning that MoF is trying to manage a sound and prudent fiscal outlook.
• We believe risk to remain in place as Covid-19 is still haunting and high probability of the Fed to rollback the stimulus.
Market Projection
• We expect there is still room for yield to drop although limited for today’s trading activity (08/18/21). We foresee 10 year Indo GB yield to move within range of 6.30%-6.35%.
• The government will conduct an auction for 7 series of debt securities today, that we believe the IDR33tn indicative target would be reached.
• We like FR0086, FR0071, FR0078, FR0087, FR0068, FR0083 and FR0076 for trading purpose.
Disclaimer
