Danareksa Weekly Report 2018, 27 Maret 2018 : Another Stormy Week | ||
March 28, 2018 07:12 | ||
Global market uncertainties According to the economic projection released by The Federal Reserve at the FOMC last week, the central tendency for Fed rate in 2018 was at the level of 2.1% - 2.4%. In other words, the reference rate could potentially increase 3 to 4 times in 2018 (including last week’s increase). However, some changes in the economic assumptions that tend to be more optimistic indicating the chances of Fed Rate may increase 4 times this year still relatively high. Following the announcement, the yield on the 10-year US Treasury curve fell from 2.89% on Wednesday (3/21) to 2.82% late last week (3/23). President Donald Trump’s statement last Thursday on import tariffs on Chinese products created negative sentiment in the capital markets, especially the stock market. After the statement was released on 22 Mar 18, the Dow Jones stock index weakened 1.77% the next day. Asides from potential trade wars, another concerns of the market is that Trump’s statement could prompt China to sell-off US Treasuries. At the end of January 2018, China still held the largest amount of US Treasuries, i.e. around US$1.17 trillion, or about 19% of the total foreign holdings. The Government yield increases The Fed’s decision last week is predicted to pressure the US treasury volatility levels. On the other hand, the increasing trend of foreign ownership on IDR Tradable Government SBN during the last week is expected to continue. Although it will be limited, but market movements expected to improve during this week. Based on our yield curve valuation model, the IDR 10-year Government bond yield is estimated around 6.65% - 6.85% this week. Investors still prefer short tenors to long tenors The auction will be held again on 27 Mar 2018 for the following series: SPN03180628, SPN12190314, FR0064, FR0065, and FR0075. The total indicative target for this auction is IDR17 trillion with a maximum target of IDR25.5 trillion. |