Global Market Update
• The benchmark 10-year UST yield jumped 16 bps to 2.31% to start this week after Fed’s chair Powell said labor market is strong and inflation is much too high.
• Yields on US government bond increased 11-19 bps along the curve yesterday following Powell statement on labor market and inflation.
• Furthermore, Powell also signaled that US central bank needs to be more aggressive in its monetary tightening.
• A more than 25 bps rate hike is likely if necessary and balance sheet reduction could start by May-22.
• Powell statement on monetary policy pointed out more tightened financial condition.
• US equity market closed lower on Monday (03/21/22). DJI declined 0.58% while S&P 500 slightly weakened 0.04% and Nasdaq Composite fell 0.40%.
Domestic Market Update
• The 10-year Indo GB yield fell 2 bps to 6.69% while the 5-year Indo GB yield was steady at 5.56% yesterday (03/21/22).
• The IDR value was slightly appreciated against USD to the level of IDR14,337/USD yesterday (vs IDR14,343/USD last week).
• Risk premium which is reflected by the 5-year Indo CDS was up from 87.96 bps to 96.93 bps.
• Government successfully issued IDR18.41tn of SR016 attracting 44,579 investors across generation in Indonesia.
• SR016 coupon was at 4.95%, the lowest in history of issuance of tradable retail sovereign sharia securities and in line with government policies in an effort to reduce yields and the cost of issuing bond.
Market Projection
• Government of Indonesia is scheduled to conduct auction for sovereign sharia securities today with the indicative target set at IDR9 tn.
• We think during the moment of rising government bond yields globally, investors tend to be wait and see, thus this may result in lower incoming bids from the previous auction.
• Along with the increase in interest rate, investors may rebalance their portfolio towards shorter duration asset.
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to keep steady within a range of 6.70-6.80% for today.
• Attractive Indo GB series to be traded today : FR0086, FR0090, FR000064, FR0078, FR0087, FR0091.
Disclaimer On
