01 September 2023
Fixed Income Report September 1, 2023
Global Market Updates
• Wall Street equities was mixed Thursday (Aug 31, 2023), with S&P 500 and DJI slipping 0.16% and 0.48%, while Nasdaq edged up 0.11%, respectively, as investors mainly took caution ahead of labor market readings Friday.
• US initial unemployment claims showed a decline of only 4k to 228k, or in other words, a stronger than expected labor market compared to the market’s expectations of a rise to 235k.
• There were mixed signals from the labor market, however, when the continuing jobless claims increased by 28k to 1.73mn, compared to forecasts of 1.71mn.
• This was met by dovish-tilted comments from Fed’s Bostic that officials should wait and see to prevent unnecessary damage as other indicators showed high rates have bitten into the economy.
• The 10-year UST yield fell by c. 2 bps to 4.09%, while the 2-year UST yield slipped c. 5 bps to 4.85%. The inverted 2s10s spread narrowed to -76 bps.
• Global bonds closed lower: UK 10-yr gilts fell 6.2 bps to 4.36%, German 10-yr bunds fell 7.9 bps to 2.47% and JGB 10-yr edged down 0.1 to remain at 0.65%.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds mainly appreciated Wednesday (Aug 31, 2023). The 10-year Indonesian government benchmark series (FR0096) yield edged up 0.4 bps, while most gains were seen from the short end series, with the 2-year Indo GB yield slipping 3.1 bps.
• The Indonesian gov’t 2s10s bond curve further widened to 14 bps (vs 10 bps previously).
• As of Aug 28, on a WoW basis we saw a net inflow of IDR8.2tn into Indonesian gov’t securities, led by inflows from the banking sector (IDR29.5tn) and insurance & pension funds (IDR7.3tn).
• In Aug 29 alone, Indonesian gov’t securities recorded a daily net foreign inflow of IDR290bn, indicating a rekindling in foreign funds’ interest.
• The IDR managed to slightly appreciate against the USD (USD/IDR ticked down 0.1%), following UST’s sustained strengthening.
Market Forecast
• Given the recent developments that unfolded within the global and domestic markets, we expect the 10 year Indo GB yield to move within the range of 6.30-6.40% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0082, FR0087, FR0096.
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