Global Market Update
• UST yields climbed 5-25 bps higher along the curve on Thursday (02/10/22). The benchmark 10-year UST yield rose and finally topping above 2% after rising 10 bps.
• Another benchmark for short term interest rate, the 2-year UST yield moved more aggressive with yield gains of 25 bps to 1.61%.
• The jump in UST yield came after inflation data release. US CPI was recorded an increase of +0.6% MoM/+7.5% YoY in Jan-22.
• Inflation figure was above market expectation at +0.4% MoM/+7.2% YoY. Higher than expected inflation made market start to price in more aggressive tightening policy.
• St Louis Fed’s president James Bullard said that he was open to 50 bps hike in Mar-22.
• The Fed’s officials statement also triggered market to start anticipating 50 bps hike in Mar-22 with the probability of 81.2%.
• US stock market dipped in red with DJI downed 1.47%, S&P 500 dropped 1.81% and Nasdaq Composite fell 2.10%.
• Elsewhere, the benchmark government bond yields also rose globally.
Domestic Market Update
• The 10-year Indo GB yield was slightly up by 1 bps to 6.48% on Thursday (02/10/22) in line with our daily forecast range of 6.40-6.50%.
• After being corrected, the IDR value rose against USD and was closed at IDR 14,343/USD yesterday (vs IDR14,358/USD in the previous day).
• Meanwhile risk premium also marked another decline, reflected by 5 year Indo CDS that stood at 91.29 bps yesterday or dropping from previous day of 92.56 bps.
• On the policy side, Bank Indonesia kept its benchmark policy rate (BI 7 day reverse repo rate) unchanged at 3.5% in Feb-22 meeting.
• Moody's has affirmed Indonesia's sovereign credit rating at Baa2 with stable outlook as announced on Feb 10, 2022.
• The key contributing factors to this rating affirmation including macroeconomic resilience and sound macro-policy.
• We think this will be positive catalyst to attract capital inflow. As of Feb 8, 2022 BI reported that there is an inflow of USD1.1bn which we believe it also reflect that Indonesia remains attractive destination for investment even amid Fed's policy normalization that historically triggered massive outflows from EM countries.
Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to increase to a range of 6.45-6.55% for today.
• Attractive Indo GB series to be traded today: FR0070, FR0059, FR0064, FR0071 and FR0052.
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