Global Market Update
• U.S. 10 year treasury yield rebounded to 1.23% in July 20, 2021 after dropping to the lowest level in five months in the previous day.
• At the same time U.S equity market also rebounded with DJI rose 1.61%; S&P 500 appreciated by 1.52% and Nasdaq Composite climbed 1.57%.
• The bounce in Treasury yields indicating some concerns that Covid-19 resurgence in association with Delta variant widespread would slow down the economic recovery, despite consistently rising inflation figure recently.
Domestic Market Update
• ICBI closed at 322.09 in July 19, 2021 or 0.12% higher than in the previous week.
• 10 year Indo GB yield downed 5 bps to 6.32% in the same period or 14 bps lower than our fair yield calculation or nearly at our lower bound fair yield valuation.
• U.S Treasury & Indo GB spread rose to above 500 bps.
• Rupiah weakened to 14,515/USD and risk premium as reflected by 5-year CDS rose 1.43 bps to near 80 bps, the highest level in one month.
• In our view, rising price in
Market Projection
• Although there was a bounce back in U.S Treasury yield we expect Indonesia’s bond yield to continue to decline yet the decline might be limited.
• Given the further potential yield declines the long end series of Indo GB remained attractive as 16 series were traded at fair price and 4 series were traded at a discount (See Exhibit 5).
• Today government will conduct a Government Debt Securities auction for series SPN12211021 (new issuance), SPN12220331, FR0090, FR0091, FR0088, FR0092,FR0089 with the indicative target of IDR33 tn and maximum target of IDR49.5 tn. We expect the investors demand to be strong maturing government bond series FR0053 last week adding nearly IDR99 tn investor liquidity. Therefore we believe government would be able to reach its indicative target.
Disclaimer
