Global Market Update
• U.S. 10 year treasury yield closed below 1.29% in July 21 after adding 1 bps from the previous trading session.
• Although the safe haven asset has rebounded, yield remained low. A volatile government bond market has indicated a worries about slower growth and stubborn inflation.
• Widespread of Delta variants across U.S might hinder economic boom meanwhile continued price pressures were more aggressive and persistent than central bankers had expected after consumer price rose lofty 5.4% in June-21.
• On the other side U.S. equity market recorded an appreciation after closing nearly 1% higher for all 3 indices (DJI +0.83%; S&P500 +0.82% and Nasdaq Composite +0.92%).
Domestic Market Update
• ICBI closed 0.08% higher to 322.4 yesterday. Meanwhile 10 year Indo GB yield as we have predicted experiencing a limited decline of 1 bps at the same time or 3 bps higher than -1STD our fair yield valuation.
• U.S Treasury & Indo GB spread rose remained above 500 bps and pressures on rupiah continued. The domestic currency depreciated 0.17% from previous position against USD to 14,543/USD in July 21, 2021.
• Government has successfully issued 7 series of debt securities in yesterday’s auction. Total amount awarded was IDR34 tn or IDR1 tn higher than the indicative target. As we have expected investors appetite was still solid as total incoming bids were IDR95.5 tn.
Market Projection
• We foresee there is a potential sideways or a limited movement in domestic bond market for today.
• We expect 10 year Indo GB yield would rise within range of 6.31-6.39% for July 22, 2021.
• Given the potential of limited market movement short term trading strategy may be well suited with some of the government bond benchmark series such as FR0086, FR0087 and FR0083 remained attractive as it traded at fair value.
