15 November 2023
Fixed Income Report November 15, 2023
Global Market Updates
• Wall Street equities’ rallied Tuesday (Nov 14, 2023), DJI surged +1.43%, S&P 500 went up +1.91%, and Nasdaq climbed +2.13%, bolstered by the better-than-expected US CPI data, leaving the market to believe that rate hikes are now completely out of the table.
• The US Oct-23 CPI slid down to 3.2% YoY from 3.7% YoY in Sep-23 (vs consensus of 3.3% YoY). The core CPI also cooled down to 4.0% YoY from 4.1% YoY in Sep-23 (vs consensus of 4.1% YoY).
• This has led market participants to disregard any possibilities of any further rate hikes by the Fed, with 99.8% probability of a rate hold to take place in Dec-23’s FOMC meeting, according to CME Fedwatch. Consequently, the rate cuts are expected to commence as soon as May-24’s FOMC.
• US Treasury 10-yr yields plummeted by 19 bps in response, landing at 4.44%. The shorter-termed UST 2-yr yields followed suit, falling by 22 bps to 4.80%.
• Market’s angst and volatility have simmered down as well, as seen by the slip in the VIX index by -4.1% as well as MOVE index’s cool down by -0.3%.
• Global bonds also followed the rally trend; the German bund 10-yr yield finished 11 bps lower at 2.6%, the UK gilt 10-yr yield slid 16 bps to 4.15% while the JGB 10-yr yield bumped up 0.9 bps.
Domestic Market Updates
• Indonesian benchmark series of LCY government mostly settled lower Tuesday (Nov 14, 2023), with the 10-yr benchmark yield shooting up 9 bps to 6.93%.
• IDR closed stronger against the USD (USD/IDR rose 0.26% to 15,695) Tuesday; supported by the weaking in DXY index and the yields downtrend. We see that IDR has more upside potential today given yesterday’s UST yield slump.
• The demand in yesterdays gov’t SBN auction remained solid, garnering a total demand of IDR33.7tn (vs previous auction’s IDR35.9tn), and recorded a total awarded bids of IDR19tn (vs previous auction’s IDR19.3tn).
• As expected, the 5-yr benchmark candidate FR101 accrued the most bids, amounting to IDR12.5tn with a bid-to-cover of 1.55, followed by the 10-yr benchmark candidate FR100, with total bids of IDR8tn and a higher bid-to-cover of 2.51.
• We expect the domestic bond market to enjoy windfall of US positive macro sentiment, with eyes kept on the front-end of the curve as they are mostly discounted.
Market Forecast
• Given the recent developments that unfolded within the global and domestic markets, we expect the 10-yr Indo GB yield to move within the range of 6.75-6.90% for today.
• Attractive Indo GB series to be traded today : FR0040, FR0081, FR0096, FR0100.
Disclaimer On
FR40
FR81
FR96
FR100
