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The sell-off in global bond markets continued on Friday (11/10), driven by the release of the US consumer inflation expectations data for November, which came in at 4.4% yoy (Oct: 4.2% yoy; Cons: 4% yoy). However, the selling pressure was not as intense as on Thursday (11/9) since consumer sentiment weakened unexpectedly to 60.4 (Oct: 63.8; Cons: 63.7). The 10Y UST and Bund yields rose 3 and 7 bps to 4.65% and 2.72%. Meanwhile, the S&P bond index for developed markets and EMBI for emerging markets fell -0.1%. This situation might push 10Y and 5Y INDOGB yields up, both of which rose 8 and 14 bps to 6.85% and 6.87% on Friday. However, the yield spread between 10Y and 2Y INDOGB remained at -9 bps due to the selling action, which also led to an 8 bps 2Y yield hike to 6.95%. We project the 10Y INDOGB yield to move up to 6.85-6.95% today, while Rupiah might consolidate at IDR 15,650-15,750 per USD, following the flattish movement of the US dollar index on Friday.
Fixed Income News: Incoming bids in the SRBI auction reached IDR 13.2tn (11/8: IDR 11.1tn). However, Bank Indonesia decided to keep the supply of new SRBIs relatively low, with a new issuance value of IDR 6tn (11/8: IDR 3tn). Meanwhile, the SRBI 12M discount rate fell to 6.99% (11/8: 7.01%). We suspect that the decision to reduce SRBI supply was made to maintain the interest of market players ahead of the upcoming SVB and SuVBI auctions on November 15. (Bank Indonesia)
Global Economic News: UK GDP growth fell to 0% qoq in 3Q23 (2Q23: 0.2% qoq; Cons: -0.1% qoq). On an annual basis, the GDP growth was relatively unchanged compared to the previous quarter, coming in at 0.6% yoy (2Q23: 0.6% yoy; Cons: 0.5% yoy). This was mainly caused by the better-than-expected GDP growth in September of 1.3% yoy or 0.2% mom (Aug: 0.5% yoy or 0.1% qoq; Cons: 1% yoy or 0% qoq). In our opinion, the economic atmosphere in the Eurozone and the UK will remain relatively gloomy for a while. (Reuters)
Domestic Economic News: The ICP average fell to USD 86.72 per bbl in October (Sep: USD 90.17 per bbl), mainly due to the decline in Brent crude oil prices to USD 89.1 per bbl (Sep: USD 92.4 per bbl). We expect another decline in November, which should help reduce domestic inflationary pressures.
Recommendation: FR0096, FR0097, FR0098, FR0100, FR0101.
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