The Battle Over The US Government’s Borrowing Limit Is Likely to Come to The Fore

The battle over the US government’s borrowing limit is likely to come to the fore as it reaches its USD 31.4 trillion limit, as emergency fund that has been used will only be sufficient until the end of June. The US is hoping that the government can make some spending cuts before they agree to a higher ceiling; as happened in 2011, where S&P was forced to cut the US debt rating for the first time, resulting a chaos in the financial markets. This matter is considered critial from an economic and financial point of view, as failure to raise the ceiling will underminde investor confidence in the US economy and weaken the US Dollar. A number of macroeconomic data will also catch the market attention today, including PMIs from Japan, Germany, Eurozone, UK, and US. Additionally, the US is to publish a first estimate of 4Q22 GDP on Thursday with consensus 2.6% (vs. previous quarter 3.2%).

Corporate News
BRI Plans to Continue Issuing Green Bonds. The green bond market is still considered prospective this year, along with the recent issues about environmental, social, and corporate governance (ESG standards). Several banks, such as PT Bank Rakyat Indonesia (Persero) Tbk (BBRI), will also boost the funding. The company sees the potential for funding through green bonds is vast. This is reflected in the first phase of green bond issuance last year, which was oversubscribed 4.4 times. (Bisnis Indonesia)

Domestic Issue
Bank Indonesia’s raised interest rates by a dovish 25 bps, sending the state bond yields even lower. All new bonds are currently trading at premium prices (>100). According to Bloomberg, the 5-year FR95 traded at 100.14 (+0.15%) or yielded 6.34% (-3.3bps), the 10- yr FR96 at 102.73 (+0.53%) or yielded 6.62% (-7.4 bps). By 2023, investors’ concerns are expected to shift from inflation worries to economic growth worries; thus this issue will further support the bond market. (Mandiri Sekuritas)

Recommendation
ID10YT is waiting to cross the 6.72 yield level as it is the MA10 resistance within the Parallel Channel downtrend. A successful break of this resistance will clear the way for US10YT to yield 6.83 / 6.90 / 7.0 / 7.05. ADVISE: Buy on Break, or gradual Average Up. US10YT is still moving in a Falling Wedge pattern (medium-term downtrend), although for the short term, it is trying to pass MA 20 & MA50 Resistance in the range of 3.57-3.6. Success in breaking the wall will open up the potential for strengthening towards a yield of 3.74. ADVISE: Average Up accordingly.

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