Global Market Update
• The benchmark 10-year UST note yield fell 8 bps to 3.00% to start this week (07/11/22).
• However yields between shorter and longer maturity remain inverted. Spread of 2 and 10-year UST note was -8 bps.
• Investors focus on US inflation data that will be released on Wednesday, consensus estimate inflation rate to increase by 8.8% annually, higher than previous month figure.
• US benchmark equity indices fell last night. DJI was down by 0.52% while S&P 500 and Nasdaq Composite fell 1.15% and 2.26% respectively.
• Falling UST yields may indicate that US economy is on the brink of recession as the spread between short & long rate is still in negative territory.
• Historically, the inverted yield curve will be followed by economic output contraction with the median time of 533 days post the inversion.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) rose 3 bps to 7.28% on Monday (07/11/22).
• The IDR slightly strengthened against USD to IDR 14,975/USD on Monday (vs IDR 14,979/USD last week).
• Indonesia’s risk premium 5-year CDS also slightly fall to 145,14 bps yesterday from 145.28 bps last week.
• On the data front, Indonesia retail sales grew 2.9% YoY in May and is projected to increase by 15.9% YoY in Jun-22.
• The positive performance of retail sales was due to mobility & economic improvement as well as the momentum of the Eid al-Fitr holiday.
• Going forward, respondents also expect that inflationary pressure will decrease for the next 3 and 6 months along with expedited goods distribution.
• Government will also conduct sharia securities auction for 6 series today with the indicative target of IDR7tn.
Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 7.25-7.45% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0081, FR0084, FR0090, FR0047, FR0052, FR0054, FR0091.
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