Global Market Update
• The 10-year U.S. treasury yield dipped 7 bps to a level of 1.41% on Monday (13/12/21). U.S. treasury yields slipped 1-7 bps along the curve.
• U.S. stocks market closed weaker last night with Nasdaq Composite fell 1.39%, S&P 500 slipped 0.91% and DJI was down 0.89%
• The Fed is expected to end tapering process earlier and followed by hiking interest rates on the back of encouraging labor market data and persistent high inflation.
• From a data front, U.S. consumer inflation expectation rose to 6% in Nov-21, in line with consensus estimate but higher than previous month figure of 5.7%.
• While from Eurozone, the Reuters poll indicates that the European Central Bank (ECB) would halve its monthly bond purchases amounted at EUR80bn starting from Apr-22.
• The poll’s participants also expect further details on how the ECB will lift its Pandemic Emergency Purchase Programme (PEPP) after Mar-22 while cautiously allocating more in Asset Purchase Programme (APP) until at least the end of 2022.
• Economists now consider the fourth wave of pandemic with arising spread of the Omicron variant as the biggest downside risk towards the European economy next year, followed by surging inflation rates which have pushed their benchmark yields to the lowest levels within this month.
• Inflation rate in India rose 4.91% YoY in Nov-21, below consensus forecast at 5.1% YoY but higher than previous month’s figure of 4.48% YoY.
Domestic Market Update
• The 10-year Indo GB yield inched up 1 bps to level of 6.29% on Monday (12/13/21), still in line with our daily projection range of 6.20-6.30%.
• The value of IDR against USD strengthened to IDR14,343/USD yesterday. Meanwhile, 5-year Indo CDS edged down to 74.72 bps.
• The finance ministry’s head of budget financing Luky Alfirman said the potential revenue increase in 2022 can improved the domestic fiscal deficit to go below the initial forecast at 4.85% of GDP.
• Despite the global central banks’ current move on tightening their monetary policy, Indonesia will still adopt the ‘opportunistic, flexible and prudent’ debt strategy, which relies on revenue generation and financial market conditions.
• The government will focus more upon rupiah bonds with medium and long tenors next year, where the retail bonds sales target may be raised 3% to approximately IDR100tn.
• Indonesia’s government also projected to raise 18-20% of 2022’s Indonesia debt in foreign currencies and use bond purchase agreement with the central bank as needed.
Market Projection
• Given the recent development, we expect the 10-year Indo GB yield to fall and move within range of 6.20-6.30% today.
• Attractive Indo GB series to be traded today: FR0081, FR0084, FR0086, FR0090, FR0071, FR0078, FR0082, FR0087, FR0091, FR0092.
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