Global Market Updates
• Inflation in the US is still too high for comfort according to the bulk of FOMC members, as Powell doubled down on the likelihood that the Fed would hoist the interest-rates two more times.
• The latest CPI data release from UK proved to be unexpectedly sticky with a 8.7% YoY increase (vs consensus of 8.4% YoY), further proving the point of the FOMC caution.
• The US yield curve is on the verge of once more diving 100 bps below zero, with the long-term 10-year benchmark slipping down 2 bps to 3.72% while the 2-year benchmark remained flat.
• US market consensus is now looking at a 71.9% probability for further a rate hike on the upcoming FOMC meeting.
• The hawkish-tilting sentiments left no room for the bulls, weighing down and extended the DJI, S&P 500 and Nasdaq’s losses yesterday.
• In contrast, Asian stocks seems to be looking past any recession signals coming from the west, partly reflected from most central banks taking a break from their tightening cycles with China in easing mode, with MSCI Asia Pacific Index running at an undemanding 1.5x PBV compared to S&P 500’s above 4x.
Domestic Market Updates
• The benchmark series of LCY government bond prices took a rebound on Wednesday (Jun 21, 2023). Indonesia’s benchmark 10-year LCY government bond yield FR0096 fell 3 bps to 6.29% whereas other benchmark series remained relatively flat.
• Domestic LCY government bond yield decline was also accompanied by IDR appreciation against major currencies, with the USD/IDR posting a -0.37% slip yesterday.
• Ahead of the Bank of Indonesia’s (BI) Board of Governors meeting to be held today, the market is not expecting any rate hikes as the economy has priced in an in-line inflationary easing towards BI’s target.
• Given the stable outlook on rate policies, government bonds transactions should not be looking at any surprise in volatility.
Market Forecast
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 6.20-6.40% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0077, FR0084, FR0096.
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