14 Juli 2023
Fixed Income Report July 14, 2023
Global Market Updates
• Wall street continued its bull run Thursday (Jul 13, 2023) as market bets Fed’s hawkish run will soon come to an end; megatech companies pushed Nasdaq up +1.59%, S&P 500 gained +0.85% and DJI up another +0.15%, followed by strong rebounds from stock indexes across the globe.
• The disinflation narrative has started to price in, after a flurry of encouraging macro data releases this week, the more recent one being producer price index (PPI) for final demand in Jun-23 that rose only 0.1% YoY, smallest gain since 2020 and below consensus’ 0.2% YoY.
• That encouraged investors to take on riskier asset classes, with the US long-term 10-year treasury yield sliding -9.4 bps, while the policy-sensitive short-term 2-year yield plummeted another 13 bps, narrowing the 2-10 year yield spread to -0.83 bps.
• Market participants still see July’s rate hike to take place (92.4% likelihood vs previous day’s 94.2%), but raised the wager of July’s rate to be terminal, despite official’s wait and see stance.
• China’s worrisome, below-consensus exports/imports reading yesterday (-12.4%/-6.8% YoY vs -10%/-4.1% YoY) shows that a waning global economy and a battered private sector confidence screams for more policy support. Exports are expected to further decline in 2H23, while domestic demands might see some recovery from further rate cuts.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government bond mostly appreciated yesterday (Jul 13, 2023). The 10-year LCY government bond’s (FR0096) yield saw another -2.2 bps decline.
• The spread between 2-year and 10-year government bond remained flat at 0.24% (vs previous day’s/week’s 0.24%/0.35%).
• IDR further appreciated against the USD yesterday, though was closed mixed against other major currencies. The USD/IDR rate declined by -0.73% to IDR14,968.
• The gov’t bond market saw an accrual in foreign ownership as of Jun 12, 2023, with a recorded net inflow of IDR1.1tn after a -0.17% foreign position decline from the previous week.
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 6.10-6.20% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0078, FR0081, FR0082, FR0087, FR0096.
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