Fixed Income Update 11 Jan 2024
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 11 January 2024
The Odds Ratio of The Fed RateIs Crucial
The latest US labor data, particularly ADP Non-Farm Employment Change, Weekly Initial Jobless Claims, Non-Farm Payrolls, Participation Rate, and Unemployment Rate, have fueled expectations of sustained high inflation. This has diminished the likelihood of a Fed Rate decrease on 20 Mar ‘24, while propelling a reversal in the direction (technical rebound) of UST yields to above 4.0% in the second week of 2024. Simultaneously, US Manufacturing PMI for Dec '23 outperformed its peers, supported by a lower-than-expected trade deficit for the same month compared to the preceding one, thereby maintaining the DXY above the 102 level for this week. Meanwhile, Indonesian data continues to exhibit positive signs. As of 29 Dec '23, FX reserves saw an increase of USD8.3 bn compared to the previous month. Additionally, consumer confidence remains in an expansive phase continuing into Jan '24.
The US labor market data, encompassing both Continuing Jobless Claims and Weekly Initial Jobless Claims, will continue to draw the market's attention. Additionally, inflation data in the US, including both headline and core CPI and PPI, are driving a sense of caution among global market participants, prompting a wait-and-see approach. Moreover, the release of Chinese data, including inflation figures (CPI and PPI) and trade balance (comprising export and import data), as well as the UK's data (GDP, Industrial Production, Manufacturing Production, and trade balance), is expected to significantly influence global market movements, particularly concerning the Dollar Index (DXY). On the domestic front, the sustained 2.1% retail sales figure serves as a positive indicator reflecting the robustness of the retail sector. Furthermore, the upcoming trade balance data on 15 Jan '24, is anticipated to garner market attention, potentially influencing movements in the IDR and the risk premium of SBN.
Regards,
Fikri C Permana - KBVS Research Team