MGS and GII yields mostly increased this week, moving between -0.3 bps to 7.6 bps overall. The 10Y MGS yield initially rose by 4.5 bps to 3.820% on Feb 7, reaching a three-week high, before settling at 3.798% by yesterday (+2.3 bps).
Domestic yields turned higher partly in line with rising global bond yields, but largely avoided the sizeable selloff seen among US Treasuries. Besides deteriorating global risk sentiment, local players may have been concerned by weaker domestic data, with December’s IPI growth registering below market expectations (3.0%; Consensus: 4.2%; Nov: 4.8%). Local yields may trend rangebound-to-lower next week, steered by a potential decline in US yields.
After strong foreign demand in January, Kenenga is of the view that domestic bonds may face some selling pressure this month as global risk-off sentiment reappears. That said, the bond market will likely still record an overall net foreign inflow in 1Q23; and expect this to sustain throughout 2023, especially if the Fed completes its tightening cycle in March or May.
