Global Market Update
• The 10-year U.S. treasury yield rose by 7 bps to 1.59% last night. Yields moved 2-6 bps higher along the curve. Solid job reports spurred yields to rise.
• U.S. Labor Departments weekly jobless claims fell sharply. As of October 2, fillings for unemployment benefits totaled 326,000 below the 345,000 consensus estimate and previous week level at 364,000.
• Previously, ADP reported that U.S. private jobs rose by 568,000 in September21, well above consensus forecast of 425,000 new jobs and August reading of 374,000.
• Wall Street closed higher last night with DJI rose 0.92%, S&P 500 added 0.83% and Nasdaq Composite lead the gain with 1.05% appreciation.
• Rising risk appetite was supported by Senate approval for temporary lift to U.S. debt ceiling to avert potential default.
• In China, service activities returned to growth in September with the Caixin/Markit Services PMI reading rose to 53.4 from 46.7 in August-21.
• Expanding China service sector was driven by the receding Covid-19 outbreak in eastern province of Jiangsu.
Domestic Market Update
• The 10-year Indo GB closed at 6.21% on Thursday (10/07/21). The benchmark yield was still in our forecast range of 6.15%-6.25%.
• The 5-year Indo CDS dropped to 85 bps yesterday. Rupiah continued to gain its strength to IDR 14.217/USD.
• Indonesian parliament decided to pass Tax Harmonization Bill including hiking VAT from 10% to 11%, carbon levy and keeping corporate tax rate unchanged at 22% compared with earlier plan to cut it to 20% in 2022.
• This law is aimed to optimize revenue collection and tax compliance, implying an additional revenue of IDR130tn and higher tax ratio to 9.2% GDP.
• We do understand that fiscal consolidation is much needed in order to maintain fiscal health. However implementing fiscal tightening too soon would be counterproductive with the plan to boost economic growth.
• Rising VAT from 10% to 11% would only hurt consumption in our opinion, given that 2022 macro theme remains a recovery momentum which we strongly believe government supports are still needed.
• Indonesia FX reserves position in September-21 stood at USD146.9bn rising USD2.1bn from USD144.8bn in August-21. This was attributable to tax and services receipts and the government’s external debt withdrawal.
Market Projection
• We expect the 10 year Indo GB yield to increase and tend to move within range of 6.20% - 6.30% today.
• Attractive Indo GB series to be traded today : FR0086, FR0082, FR0087, FR0068, FR0080, FR0072.
Disclaimer
