17 Juli 2023
Fixed Income Report July 17, 2023
Global Market Updates
• Wall street’s momentum got hampered upon last week’s closing (Jul 14, 2023); Nasdaq got held back by -0.18%, S&P 500 edged down -0.1% and the DJI rose a mere +0.33% after sentiments and inflation projection data releases from University of Michigan (UoM) showed the inflation problem has yet to subside.
• The UoM sentiment/current conditions/expectations readings for July came at 72.6/77.5/69.4, reaching 2-year highs and overshot the consensus by large (65.5/70.5/62.0), and the 1-year inflation reading didn’t make it any better (3.4% YoY vs Jun 3.3% YoY and consensus of 3.1% YoY).
• The overly-positive readings that showed rise in short-term price expectations nudged the Treasuries to reacted immediately, sending the sensitive 2-year UST notes to soar by 15 bps, while the 10-year UST notes jumped by 7 bps. The 2-10 year UST yield spread widened back to -0.91 bps.
• This put Fed officials on sustained caution, with Waller hinting a probable two-more hikes to be prescribed for this year, and swaps market already pricing in a 25 bps rate hike this month and another hike later this year with a 33.3% probability.
• Starting this week markets will discern several macro data readings, of utmost importance, GDP growth from China to gauge the global economy’s outlook.
Domestic Market Updates
• Indonesia’s benchmark series of LCY government bond ended last week relatively flat (Jul 14, 2023). The 10-year LCY government bond’s (FR0096) yield upticked by 1 bps.
• The spread between 2-year and 10-year government bond slipped to 0.20% (vs previous day’s/week’s 0.24%/0.28%).
• IDR further appreciated against the USD last week and was closed mixed against other major currencies. The USD/IDR rate edged down by -0.07% to IDR14,958.
• The Indo GB saw a jump in overall positions as of Jun 13, 2023, with a recorded net inflow of IDR13tn, accounting conventional banks as the top net buyer (IDR9.9tn), followed by Insurance and Pension funds (IDR6tn) and nonresidents (IDR1.6tn), whilst BI released IDR5.1tn of its positions.
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 6.15-6.25% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0078, FR0081, FR0082, FR0087, FR0096.
Disclaimer On
