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The UST 10Y yield reached the consensus equilibrium last night at 4.99%, which reduced the upside risk of another yield hike in the future (SSI estimate: 10-20 bps). However, INDOGB 10Y yield was stuck at 6.88% yesterday (10/19), even though the INDOGB 5Y and INDON 10Y yields spiked by 16 and 12 bps to 6.88% and 6.26%. In our opinion, the INDOGB 10Y is facing a high risk of another sell-off, due to the fact that its yield spread with the UST 10Y is too low at 189 bps (6-month average: 230 bps), and its yield is roughly the same as the INDOGB 5Y. The risk of an INDOGB 10Y sell-off is even higher after the surprise 7DRRR hike yesterday (10/19). We expect the INDOGB 10Y yield to experience pressure and move toward 6.95-7.05%, with an estimated peak range of 7.3-7.4%. Meanwhile, Rupiah might depreciate further toward the IDR 15,850-15,950 per USD range due to the potential INDOGB sell-off.
Fixed Income News: BI plans to hold the first SVBI and SUVBI auction on November 17. Those instruments are part of the expansion of SRBI (Sekuritas Rupiah Bank Indonesia) which is expected to help maintai the stability of Rupiah. SVBI uses a discount system similar to SRBI. Meanwhile, SUVBI uses simple interest due of its status as a sharia financial instrument. The underlying assets used are BI's global bonds and sukuk. Both of these instruments can be purchased by the public on the secondary market. (Bank Indonesia)
Global Economic News: Powell might consider holding interest rates in 4Q23. Although Fed Chair Jerome Powell's speech was still as hawkish as before, Powell sent several dovish messages, including the on-track inflation slowdown, financial market tightening by rising long-term bond yields, and the slowdown in US labor market expansion. In our opinion, the plan to raise FFR by 1X25 bps in 4Q23 could be canceled if the disinflation process in the US continues uninterrupted. (Wall Street Journal)
Domestic Economic News: Bulog will speed up imports of 250,000 tons of corn. This decision was taken after the latest BPS data showed a decline in corn production by 10.1% yoy to 2.49 million hectares. The decline in corn production, which is thought to be caused by El Niño, has caused prices to rise above the benchmark price of IDR 7,282 per kg (benchmark: IDR 5,000 per kg). (Kontan)
Recommendation: FR0040, FR0044, FR0056, FR0077.
Samuel Sekuritas Indonesia is a leading Indonesian securities brokerage firm. Established in 1997, the firm has grown to become one of the most respected and trusted financial services companies in the country. With a wide range of services and products, Samuel Sekuritas Indonesia has become a trusted partner to many investors, both institutional and individual.
The company offers a variety of financial services, including equity, debt and derivative securities brokerage services, research and portfolio management, asset management and capital market services, as well as a range of other investment solutions. Samuel Sekuritas Indonesia is also a leader in providing financial education and training, and has established itself as a leading provider of investor relations services.
The company has a strong research capability and is committed to providing its clients with up-to-date and reliable market analysis and recommendations. It also has a team of experienced and knowledgeable professionals who are dedicated to providing quality service to its clients. As a result, Samuel Sekuritas Indonesia has become a preferred partner for many investors in Indonesia.
In addition to its financial services, Samuel Sekuritas Indonesia also offers a range of other services, such as corporate finance and advisory services, mergers and acquisitions, and venture capital.
