Global Market Update
• The benchmark 10-year UST yield fell to 2.29% on Wednesday (03/23/22) after hitting a 3 year highs level
• On the other hand the 2-year UST yield was still hovering above 2% this week.
• Yields on US government bond declined 5-8 bps along the curve yesterday following Powell statement on tight labor market and high inflation.
• Another downside risk comes from talks between Russia and Ukraine that have failed to make a progress so far.
• U.S. President Joe Biden is set to travel to Brussels and will attend an emergency NATO summit, meet G-7 leaders, and address EU leaders at a meeting of the European Council.
• Biden and his European counterparts will announce new sanctions against Russia and new measures to tighten existing sanctions during his trip to Brussels this week.
• Oil price as reflected in Brent crude futures price jumped to USD123/barrel recently.
• US stock market closed lower. DJI dropped 1.29%; S&P 500 lost 1.23% and Nasdaq Composite was closed 1.32% lower.
Domestic Market Update
• The price of majority IDR denominated government bond saw an increase yesterday (03/23/22). The benchmark 10-year Indo GB yield slipped 2 bps to 6.71%.
• The IDR value was unchanged against USD to the level of IDR14,347/USD yesterday (vs IDR14,348/USD previous day).
• Risk premium which is reflected by the 5-year Indo CDS was down from 99.48 bps to 97.44 bps.
• Corporate bond issuance hit IDR28.8tn during the last 3 month, marking +50.8% YoY increase in issuance value.
• We believe the increase in the issuance was primarily driven by strengthening economic condition.
• On the policy side, government has ensured that VAT hike from 10% to 11% would be implemented starting from April 1, 2022.
• The 1 ppt increase in VAT would not affect inflation significantly. However the moment of hike along with the revocation of cooking oil maximum retail price policy as well as Ramadan festivities could trigger an overshoot of inflation.
Market Projection
• 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.
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