INDONESIA: Indonesian Markets Little Changed Today As Investors Await US Data
The Indonesian sov curve has twist-flattened today, better buying seen in the 7yr tenor again. The USD/IDR continues to test 16,300, Morgan Stanley downgrades Indonesian stocks to underweight on concerns around fiscal policy and the weaker IDR, while foreign investors continue to sell local stocks.
- The INDON curve is flatter, pivoting at the 7yr. Yields are are 1-4bps higher today giving back some of yesterday's late moves. The 2Y yield is +1bp at 5.30%, 5Y yield is -2bps at 5.08%, the 10Y yield is -2bp at 5.14%, while the 5-year CDS is 0.5bp higher at 72bps.
- The INDON to UST spread diff the 2Y is now 46bps (+1bp), 5yr is 66bps (+1bp), while the 10yr is 73.5bps (unchanged).
- In cross-asset moves: USD/IDR is little changed today trading at 16,294, with BI intervening around these levels, the JCI is unchanged after earlier making new ytd lows. US Tsys are also little changed today as investors await the FOMC and CPI data tonight.
- Looking ahead: There is little on the local data calendar, focus will turn to the US for hints as to when the US will start to cut rates.
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JGBS: Eyeing Downside Test Of Late Apr Lows As BoJ Reduced 5-10 JGB Purchases
JGB futures maintain a firm downside bias in afternoon dealings. We were last around 143.92, -.34. This is slightly up from session lows (143.86). April 26 lows rest back at 143.61. Beyond that lies 143.44, which is a key support point.
- Sentiment has remained weak since the BoJ bond buying op curtailed purchases in the 5-10yr tenor space compared with the late April operation (by ¥50bn). Whilst the amount purchased was still within the projected range for the current quarter it will likely sharpen focus around the likelihood of reduced purchases as we progress further into 2024.
- USD/JPY dipped initially on the news, but hasn't seen any downside follow through. The latest from our Tokyo Policy team notes risks the weaker yen trend could hasten the policy tightening process (see this link).
- In the cash JGB space, the 10yr yield is above 0.94%, +3bps higher. From the 5 yr to 40yr tenor we are around 3bps in yield terms. 10yr swap is above 1.01%, while the 20 and 30yr tenors are up 5bps in yield terms.
- Tomorrow, we have the PPI for April, along with the 5yr debt auction.
MNI EXCLUSIVE: Weaker Yen Could Lead BoJ To Tighten
The weak yen could hasten the BOJ's decision to tighten policy --On MNI Policy MainWire now, for more details please contact sales@marketnews.com.
NEW ZEALAND: Inflation Expectations Moderate Further In Q2
Inflation continued to trend in the right direction with RBNZ 2-year business inflation expectations moderating to 2.3% in Q2 from 2.5%, the lowest since Q3 2021. 1-year out declined by more falling to 2.7% from 3.2%, the lowest in three years. Household inflation expectations have been running higher than business ones and Q2 for this survey will be published on May 20. Research by RBNZ has shown that mean 1-year ahead inflation expectations have had the best relationship with inflation. Both businesses and households are signalling that the CPI is heading to the target band.
New Zealand RBNZ core CPI y/y% vs inflation expectations %
Source: MNI - Market News/Refinitiv
