Fixed Income Update 04 Jan 2024
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 4 January 2023
The Normalization of The Yield Curve Is Currently Underway
The downward trend in UST and other government bond yields that occurred towards the end of 2023 has halted in 2024. This was driven by manufacturing PMI data, particularly from Germany, the EU, the UK, and the US, which indicated a contractionary phase Meanwhile, Indonesian data, specifically PMI and inflation, portray positive signs. The PMI has been in the expansionary zone for 28 consecutive months until Dec '23, registering at 52.2 (prev: 51.7). Additionally, headline inflation in Dec '23 decreased to 2.61% YoY (Cons: 2.72% YoY, Prev: 2.86% YoY). Further positivity is expected as indicated by the Caixin Manufacturing PMI data for China, which showed favorable trends in Dec '23, reaching 50.8 (cons: 50.4, Prev: 50.7)
Throughout the remainder of this week and the initial three days of the following week, a global 'wait-and-see' approach remains predominant. Inflation data, particularly from Germany and the EU, is anticipated to influence sentiment in the global market. Additionally, US labor market data, including Weekly Initial Jobless Claims, Non-Farm Payrolls, Participation Rate, and Unemployment Rate, will be eagerly awaited by the global market. Meanwhile, domestically, the release of FX reserves, which can serve as a leading indicator for trade balance conditions, current account, capital account, and balance of payments in 4Q23, will be closely watched by domestic investors.
Regards,
KBVS Research Team