Government Bond Highlights
At the government bonds (Surat Utang Negara, “SUN”) auction dated 04/24/2018, the authorities absorbed the funds of IDR6.15 trillion from the total incoming bid of IDR17.02 trillion. The funds absorbed were lower that the indicative target of IDR17 trillion. FR0064, a 10-year tenor SUN obtained the biggest bid of IDR6.17 trillion. The Indonesia Composite Bond Index (ICBI) closed lower by 1.2% into 241.40 last week.
Last week, the U.S. 10-year Treasury yield topped the psychology limit of 3% along with the expectancy of accelerated monetary tightening by the Fed. This backdrop ignited the massive sell-off in global stocks and bonds markets as well as the depreciation of emerging countries’ currencies.
This-week global market uncertainty stems from investors’ wait-and-see acts ahead of Federal Open Market Committee (FOMC) meeting dated 05/02/18 and 05/03/18. In recent occasions, the Fed’s officials stated to leave its monetary tightening policy unchanged. However, the current markets perception on the number of Fed’s rate hikes is still opaque. Markets concern the possibility of 4x Fed’s rate hikes topping the initial projection of 3x Fed’s rates hike.
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