Company Update

22 Juli 2024

Fixed Income Report July 22, 2024

Global Market Updates

• Wall Street lost ground on July 19, as the DJIA declined by -0.93%, the S&P 500 slid by -0.71% and the Nasdaq inched down by -0.81%.

• Stock indexes closed moderately lower on Friday, with the S&P 500 and Nasdaq hitting 2.5-week and 3.5-week lows, respectively. The market was pressured by a global IT outage, which disrupted businesses worldwide following a problematic cybersecurity update by CrowdStrike Holdings that affected Microsoft's Windows systems.

• The 10-yr UST yields advanced by +5.0 bps to 4.20%, while the 2-yr yields grew by +3.0 bps to 4.49%. US Treasuries edged down on Friday as the 10-year breakeven inflation rate reached a 2.5-week high of 2.315%, reflecting rising inflation expectations and putting pressure on T-notes.

• The market currently assigns a 5% chance of a 25 bps rate cut at the upcoming FOMC meeting on July 30-31, with a 92% chance priced in for a reduction at the September 17-18 meeting.

• Meanwhile, Joe Biden’s announcement of his withdrawal from the re-election campaign on Sunday (July 21) has heightened uncertainty in the financial markets, with the USD213 billion Treasury auction looming this week.

• In Europe, the June PPI in Germany fell 1.6% YoY, in line with expectations, continuing a streak of twelve months of decreasing producer prices.

• Global bond yields moved higher on Friday: the 10-yr German bund yield rose by +3.6 bps to 2.46%, the 10-yr UK gilt yield surged by +5.9 bps to 4.12%, and the Japanese 10-yr JGB yield edged up by +0.2 bps to 1.04%.

Domestic Market Updates

• The Indonesian benchmark series of LCY government bond were mixed on July 19, with the 10-yr benchmark yield rose by +2.0 bps to 6.93%, while the 2-yr yield surged by +6.0 bps to 6.70%.

• The IDR weakened against the USD on Friday (USD/IDR rose by 0.20% to 16.190). This depreciation mirrored a broader trend in Asian currencies, which were pressured by rising US gov’t bond yields.

• Bank Indonesia reported based on transactions from July 15–18, 2024, non-residents recorded a net purchase of IDR0.69tn, consisting of a net buys of IDR0.67tn in the stock market, a net buys of IDR0.40tn in the SRBI, and a net sells of IDR0.38tn in SBN market.

• The government will conduct SUN auctions in local currencies on Tuesday, aiming for an indicative target of IDR22tn. The auctions will feature new issuance of SPN03241023 and the reopening of SPN 12250710, FR101, FR100, FR98, FR97, and FR102. We anticipate the bid-to-cover ratio to fall between 1.6 and 2.3.

• In Friday's Indo-GB series trading, FR0101, FR0100, and FR0097 attracted significant interest in outright transactions, with the highest trade volumes of IDR4.74tn, IDR2.26tn, and IDR2.04tn, respectively. Additionally, PBS032, FR0100, and FR0097 were the most frequently traded series.

Market Forecast

• Given the recent developments that unfolded within the global and domestic markets, we expect the 10-yr Indo GB yield to move within the range of 6.85-7.10% for today.
• Attractive Indo GB series to be traded today : FR0081, FR0084, FR0056, FR0075, FR0092.

Disclaimer On

FR81 FR84 FR56 FR75 FR92

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Fixed Income Report July 22, 2024