Movement in the Indonesian bond market on Tuesday (5/23) was more concentrated on the primary auction market, which saw a spike in incoming bids amid the government's decision to limit the supply of new bonds (see Fixed income news). Meanwhile, the global bond market was quite flat amid sharp corrections in the United States and European bond markets (approx.-1%). The correction was caused by the expansion of the service sector in Europe, which sparked concerns over the potential for higher ECB and BOE terminal rates (see Global economic news). We project the 10-year INDOGB yield to consolidate within the range of 6.4-6.5% today, and rupiah to continue within the range of IDR 14,800-14,900 per USD.
Fixed Income News: The Ministry of Finance absorbed IDR 7tn from the SBSN auction on Tuesday (5/23). As we previously expected, investor interest in the primary bond auction market is still high, as reflected in the total incoming bids of IDR 54.8tn, exceeding the figure from the previous auction (5/9) of IDR 40.7tn. Most of the SBSN issued were short-term PBS instruments, including 4-yr PBS003 (IDR 2.35tn) and 2-yr PBS036 (IDR 2.15tn). In our opinion, the interest in the next SBSN auction will still be high due to supply restrictions imposed by the Ministry of Finance. (DJPPR)
Global Economic News: Manufacturing sector in the United States and Europe continued in May, while services sector expansion continued. This was reflected in the decline of manufacturing PMI in the UK to 46.9 (Apr: 47.8; Cons May: 48), Eurozone to 44.6 (Apr: 45.8; Cons May: 46.2), and the US to 48.5 (Apr:50.2; Cons May: 50 ). Meanwhile, services PMI remained in the expansion zone; 55.1 for the United Kingdom (Apr: 55.9; Cons May: 55.5), 55.9 for the Eurozone (Apr: 56.2; Cons May: 55.6) and 55.1 for the US (Apr: 53.6; Cons May: 52.6). In our opinion, this could encourage the European Central Bank (ECB) and the United Kingdom (BOE) to take more aggressive steps to raise their policy rates. Meanwhile, we believe the Fed will still hold its policy rate at 5.25% in June. (Reuters)
Domestic Economic News: 2W EV sales is still quite slow. The Indonesian Electric Vehicle Industry Association (Periklindo) noted that sales of 2W EVs the last two months had only reached 517 units. All of these sales are still being verified to receive the IDR 7 million subsidy from the government. The achievement is still far from the government's sales target of 2 million units by the end of 2024. (Kontan)
Recommendation: FR0098, FR0050, FR0079, FR0081, FR0040, FR0084, FR0086, PBS017.