12 Oktober 2023
Fixed Income Report October 12, 2023
Global Market Updates
• Global equity indexes mainly continued its rally Tuesday (Oct 11, 2023), supported by burgeoned sentiments that the Fed is done with their rate hike frenzy and strong demands for the 10-yr UST notes, looking past the hot US PPI data.
• The 10-yr UST yield sank another 18.0 bps to 4.66%, after the note’s USD35bn auction posted hyped demands with a bid-to-cover ratio of 2.5, higher than the 10-auction average of 2.46.
• Global yields followed the downtrend, with the German 10-yr bund yield descending 5.7 bps to 2.72%, the UK 10-yr gilt yield plummeting 9.8 bps to 4.33%, followed by the Japanese 10-yr GB that slightly slipped to 0.77%.
• The US Sep-23 PPI readings yesterday came in hotter than expected, rising 0.5% MoM/2.2% YoY (vs expectations of 0.2% MoM/1.6% YoY), presenting as hawkish factors for the Fed but was widely overlooked by the market.
• We view that the brewing turmoil in the Middle East coupled with the juicy yield levels reached last week has resparked what has been a dormant appetite towards the world’s best safe-haven assets, inciting massive inflows towards Treasuries, followed by gold that has gained a sizeable 2.4% over the first week of October, with more upsides expected due to the uncertainty of the condition and its contagion risks.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds posted further gains Wednesday (Oct 11, 2023), following solid demands both foreign and domestic. The 10-yr benchmark series yield fell 10 bps to 6.85%. The 2s10s Indo GB spread narrowed to 48 bps.
• IDR rebounded against most global major currencies, depreciating against the USD (USD/IDR slipped 0.27% to 15,693) as the DXY lost its grounding, undercut by slipping UST yields and a strengthening in gold and the pricing in of mulled Chinese stimulus policy.
• On a WoW basis up to Oct 10, 2023, Indonesian gov’t securities accrued IDR9.3tn of net inflows, with huge accumulations from the banking sector (IDR6.26tn), others which include securities companies and other corporations (IDR6.5tn) as well as insurance and pension funds (IDR4.48tn).
• The foreign outflows thinned to only IDR40bn this week up to Oct 10, showing foreign support on the bonds prices.
• Concurrently, the 5-yr CDS slid by another 3% to 94.05, possibly to dip below 90 with this accrual trend.
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 6.70-6.80% for today.
• Attractive Indo GB series to be traded today : FR0082, FR0087, FR0096, FR0100.
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