07 Juli 2023
Fixed Income Report July 7, 2023
Global Market Updates
• Wall Street Indexes notched down further yesterday (Jul 6, 2023), with DJI closed -1.07% lower, S&P 500 slipped -0.79% and Nasdaq went down -0.82%.
• The market reacted negatively to ADP Research Institute’s surpisingly strong labor market data release as the private sector created 497k jobs in Jun-2023 (vs consensus forecasts of 228k), which investors perceive to be a burgeoning inflation rate problem for the coming months and a sure-fire hawkish alarm.
• An even more dramatic response was observed from the fixed income asset class; the long-term 10-year treasury notes jumped almost 10 bps to 4.03% upon market closing, followed suit by the shorter-termed 2-year yield which rose by 5 bps. We also observe the VIX Index to bounce up +8.9% yesterday.
• Yields from across the globe also shot up; the 10-year UK Gilt soared by +16.6 bps to a 14-year high level, the German bund closed +14.9 bps higher and the Japanese govt’ bonds saw a +2.2 bps hike.
• Markets have once again raised their wager of a rate hike to take place in this month’s FOMC meeting: probabilities now discounted at 91.8% (vs 88.7% on the previous day), with an expected peak rate of 5.42% by Nov-2023.
Domestic Market Updates
• The global unrest pertaining inflation worries carried over to Indonesia and put a halt to the bonds’ bull yesterday (Jul 6, 2023).
• Indonesia’s benchmark 10-year LCY government bond (FR0096) value fell as its yield rebounded by 2 bps to 6.18%, followed by depreciation in other benchmark series.
• S&P maintained Indonesia’s stable ‘BBB’ long-term and ‘A-2’ short-term sovereign credit rating on the back of rapid fiscal consolidations, solid revenue growth and well-registered policies.
• IDR weakened against most major currencies yesterday. It depreciated against the USD as the USD/IDR rate rose by +0.25% and closed at IDR15,045.
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 6.10-6.30% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0081, FR0082, FR0087, FR0096.
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