Global Market Updates
• The S&P 500 has closed its worst week since March by sliding -0.77%, followed by DJI that edged -0.65% lower and Nasdaq Composite closing with a -1.01% plunge, as market participants brace for two imminent rate hikes within what’s left of 2023.
• The market saw investors shifting their profits obtained from the tech rally into US Treasuries, which was subsequent with the fall in Treasury yields for the first time in c. 3 weeks.
• This week ahead, bonds might be faced with tailwinds as indicated by the plummeting term premium (less compensation is tolerated for long-term maturities), rising custody holdings at the Fed (growing foreign investors’ apetite for US Treasuries) and a deepening yield curve.
• The market is now looking at a 71.9% probability for a rate hike to take place in July’s FOMC meeting (vs 75.6% the previous day).
• China’s slowdown in consumption is once again underlined from the recent lack of travel spending during last week’s dragon boat festival holiday, scoring only 94.9% of the pre-Covid levels during the same period.
• The recent PBoC’s RMB152 billion injection into the open market operation is aimed to stimulate credit supply and maintain stable liquidity by the end of 1H23 and bolster consumption.
Domestic Market Updates
• The benchmark series of LCY government bond prices saw a mixed movement on Friday (Jun 23, 2023). Indonesia’s benchmark 10-year LCY government bond yield FR0096 edged up 1 bps to 6.28%, whereas other benchmark series remained relatively flat.
• Alongside the lack of movement from domestic LCY government bond yields, IDR was closed mixed against other major currencies, depreciating against the USD as the USD/IDR rate hiked up +0.36%.
• Indonesia’s 5-year CDS premium jumped to 87.81 from 84.04 the previous day and 81.03 last week, indicating a piling risk-perception due to the several impending rate hikes proposed by the Fed for this year.
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.
MNCS Research
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