07 Agustus 2023
Fixed Income Report 07 August, 2023
Global Market Updates
• On Friday (Aug 4, 2023) the market’s attention shifted towards the FFR-influencing data releases, namely the July Unemployment Rates, which unexpectedly edged down to 3.5% from 3.6%, and July Non Farm Payrolls which also, to the market’s surprise, posted a lower-than-expected 187k (vs 200k).
• The mixed data regarding the labor market condition was accompanied with an increase in July Average Hourly Earnings (0.4%/4.4% MoM/YoY vs consensus of 0.3%/4.2%), which markets perceived as both an on-track narrative towards a soft-landing as well as an inflationary risk.
• Despite that, the data releases along with several Fed officials’ statements that rang a dovish tune helped ease down the US Treasury 10-year yields back down to 4.05% and the UST 2-year yields followed suit with almost a 12 bps decline.
• US equities continued its decline upon last week’s closing as megacaps like Apple, Meta and Tesla weakened on the back of worrisome outlooks.
• Majority of market participants are pricing in a rate hold for September’s FOMC meeting, with CME’s FedWatch pointing to a 88% odds to that scenario, while the remaining 12% rests in an unlikely hike.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government bonds continued to weaken Thursday (Aug 4, 2023), where the 10-year (FR0096) yield have now reached 6.28%.
• The 2s10s Indo gov’t note and bond yield curve steepened further to 33 bps after staying at the lower range of c. 23bps for the past week. The rebound in US Treasuries helped restore the UST 10-year and Indo GB 10-year curve to 227.8 bps.
• IDR managed to strengthen against the USD, with the USD/IDR cross having edged down -0.10% following DXY’s weakening.
• As of 2 Aug, Indonesia has seen an foreign net inflow of IDR788bn for bond ownership since Aug 1, with a total ownership of IDR885.8tn, representing 16% of the total outstanding bonds which saw a IDR6tn net inflow.
Market Forecast
• Given the recent developments that unfolded within the global and domestic markets, we expect the 10 year Indo GB yield to move within the range of 6.25-6.35% for today.
• Attractive Indo GB series to be traded today : FR0059, FR0077, FR0082, FR0087, FR0096.
Disclaimer On
