Global Market Updates
• US markets was closed Monday in commemoration of Labor Day. Following the public holiday, the US markets should be looking at increased trading volumes post summer-trading lags, with higher volatilities to likely accompany it as well.
• Market sentiments are currently hinged on the sentiment that the Fed is unlikely to raise their interest rates any further this year (93%, 61.9% and 59.5% probability of rate holds in Sep, Nov and Dec-23 FOMC meetings), given indications of a steadily cooling labor market.
• China’s distressed property sector is bound to receive a boost from announcement that down-payment thresholds would be lowered. The country’s real estate equtity index compiled by Bloomberg jumped 8.7% yesterday, indicating improved sentiments amid improved home sales data in Shanghai and Beijing over the weekend.
• Appetite for 10-yr and 30-yr Japanese GBs will be put to the test in this week’s key auction. Japan’s MoF plans to sell JPY2.7tn (USD18.4tn) of 10-yr bonds and JPY900bn of 30-yr. Their demands have been sluggish the past month as domestic pensions funds and insurance funds have yet to offload foreign positions, seeking higher JGB yields.
Domestic Market Updates
• Indonesian benchmark series of LCY government bonds mostly ended higher Monday (Sep 4, 2023). The 10-yr benchmark series yield remained relatively muted at 6.36%.
• The shorter end bonds saw the most gains, with the 5-yr benchmark series yield plummeting by 5 bps to 6.08%, and the 2-yr bonds slipping 1 bps to 6.15%. The 2s10s yield curve stood flat at 21 bps as of Sep 4, 2023.
• The government securities auction held today will feature 7 re-openings, including SPN12231207, SPN12240529, FR0095, FR0100, FR0098, FR0097 and FR0089 with the same indicative/maximum target of IDR14tn/IDR21tn.
• We view that today’s auction could outperform last auction’s total bids of IDR34.6tn, while being heavily leaned towards the short ended yields given the sentiment that interest rates are going nowhere for some time and their still relatively discounted valuation.
• IDR closed mixed against world major currencies, standing flat against the USD (USD/IDR movements was muted yesterday).
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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