SIMINVEST – Fixed Income Monthly Report – May 2024

In May 2024, the US 10 Year Treasury Yield experienced fluctuations, initially dipping to 4.34% mid-month before rebounding to 4.5% by month-end, reflecting economic uncertainty due to disappointing data releases such as a manufacturing sector contraction and a slight rise in unemployment. Despite this, the Federal Reserve’s May meeting minutes showed policymakers’ cautious optimism about the economy’s modest growth, driven by strong private domestic purchases leading to real GDP gains, although concerns lingered regarding inflation persistence and financial stability risks, resulting in the maintenance of the current federal funds rate. Meanwhile, Indonesia’s inflation moderated to 2.84% YoY in May, driven by lower volatile food prices amidst rising housing, utilities, and transportation costs, prompting Bank Indonesia to hold its policy rate at 6.25% to stabilize inflation within the targeted range amid geopolitical tensions and currency depreciation risks. Additionally, Indonesia’s 10-Year government bond yield declined to 6.87% with increased buying activity, reflecting a narrowing spread with US Treasury yields and providing insights into investor sentiment across various bond ratings and durations. Moreover, sukuk issuance surged to IDR 0.4 trillion in May, contributing to a total 2024 issuance of IDR 3.5 trillion, dominated by the Pulp & Paper sector at 38%, while significant maturing sukuk in 2024 include those issued by PT. Jasamarga Pandaan Tol and PT. Mora Telematika Indonesia Tbk, with July witnessing the highest maturity at IDR 4.0 trillion. Similarly, Indonesia’s corporate bond market saw a significant year-over-year increase of 19.5%, totaling IDR 4.6 trillion in May 2024, although marking a notable decline compared to the previous month, with the Financial Institution sector leading issuances and PT. Tower Bersama Infrastructure Tbk emerged as the primary issuer, accompanied by an increase in average coupon rates for AAA, AA+, and A+ rated bonds compared to the previous month.

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