Global Market Update
• The benchmark 10-year note yield jumped 11 bps to 3.75% on Wednesday (10/05/22).
• On the other hand, the 2-year benchmark yield increased 4 bps to 4.14% at the same time.
• Spread between 2/10-year UST note yield was at -39 bps, narrowing from the previous day position at -46 bps.
• Following the rise in the risk free rate, US stock market fell marginally yesterday.
• The DJI declined 0.14%; S&P 500 fell 0.20%, whilst Nasdaq Composite lost 0.25%.
• Market reacted to US ADP employment data which created 208k jobs in Sep-22, higher than consensus estimate at 200k and previous report of 185k.
• Firmer US job market may further justify Fed to raise the reference rate in order to tame inflation.
• On the other hand, yield of UK & Germany 10-year benchmark government bond hit 4% & 2% respectively.
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) declined 7 bps to 7.18% on Wednesday (10/05/22).
• Indonesia’s 5-year CDS decreased to below 150 bps yesterday, yet still hovering around 148 bps.
• The IDR remained above 15,000/USD but appreciated against USD and was closed at IDR15,193/USD yesterday.
• Government has issued 5 series of SBSN on green shoe option auction yesterday amounting to IDR2.67tn.
• Based on OJK data, foreign exchange credit (forex) grew by +17.9% YoY in Jun- 22.
• We view that the significant growth in foreign currency loans is due to banks trying to increase loan yields amid the trend of rising global benchmark interest rates.
• However, in the midst of high financial market volatility, banks should be aware of the credit risk and possible asset quality deterioration of this foreign currency credit exposure.
Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 7.15-7.35% for today.
• Attractive Indo GB series to be traded today : FR0063, FR0070, FR0077, FR0081, FR0090, FR0064, FR0095, FR0082, FR0087, FR0091, FR0096.
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