Global Market Update
• Fed Chair Powell signaled the central bank will likely begin tapering by the end of this year, remarks from his speech at Jackson Hole Symposium last week.
• Fed Chair said that U.S. economy has made a substantial progress on inflation and job markets.
• However the recent plan to begin curbing the stimulus will not carry a direct increase in interest rates.
• U.S. PCE inflation rose 4.2% YoY in July-21, higher than consensus estimate and previous month.
• Meanwhile, at the same time the pace of increasing U.S. Core PCE stayed flat at 3.6% YoY.
• On Friday (08/27/21), the 10 year U.S. treasury yield fell 3.9 bps to 3.1%.
• At the same time, U.S. stock market closed higher with DJI rose 0.69%; S&P 500 increased 0.88% and Nasdaq Composite edged higher with 1.23% appreciation.
Domestic Market Update
• The 10 year Indo GB yield rose nearly 2 bps to 6.17% on Friday (08/27/21). On a weekly basis the yield has declined by nearly 20 bps.
• Rupiah stayed flat at IDR14,418/USD. The 5 year CDS was also stable at 72 bps.
• We believe that clear communication from the Fed about tapering off is the reason behind there is no spike in yield despite the debate on timing continues.
• In addition, we think that markets already priced as the U.S. treasury yield began to rise in earlier this year before normalizing at the current level.
• From August 23-26, 2021 foreign investors recorded a net buy in domestic Indo GB market with the total amount of IDR7.18tn.
Market Projection
• We foresee that the 10 year Indo GB yield to sideways today as we do not see any catalyst or pressure that would influence yields significantly.
• The 10 year yield would likely to move within range of 6.15%-6.25% today.
• Attractive government bond for trading purpose : FR0086, FR0064, FR0082, FR0087, FR0083 and FR0076.
Disclaimer
