Today’s Outlook:
US MARKETS: The release of PCE PRICE INDEX Inflation data encouraging optimism that the Federal Reserve will soon start lowering interest rates.
ECONOMIC INDICATORS: The US Federal Reserve’s favorite inflation benchmark, the PCE PRICE INDEX data, rose 0.2% on a monthly basis in June and 2.6% on an annual basis, roughly in-line with expectations. Market calculated odds of a 25 bps cut at the Sept FOMC Meeting held steady at around 88% after the PCE price index reading, according to CME FedWatch monitoring. Traders are still largely optimistic of a second rate cut in December, as LSEG data shows. This rate cut optimism is also one of the reasons fueling buying in Tech stocks and lower US TREASURY yields. UNIVERSITY OF MICHIGAN noted that Inflation Expectations for the next 5 years rose 0.1% to 3.0%, but was accompanied by Consumer Expectations & Sentiment (Jul) which also increased going forward, although there tends to still be pessimism in the current conditions. ASIA MARKETS: JAPAN reported Tokyo Core CPI and CPI (Jul) which were both more or less in-line with expectations with annual growth of 2.2% each.
COMMODITIES: OIL prices were poised to rise on Monday, trimming last week’s losses, on fears of widening conflict in the Middle East following a rocket attack on the Israeli-occupied Golan Heights, for which both Israel and the United States accused the Lebanese armed group Hezbollah of responsibility. BRENT futures rose 0.3%, to USD 81.33/barrel; while US WTI edged up 0.1%, to USD 77.25/barrel. Last week, Brent fell 1.8% while WTI fell 3.7% due to CHINA’s declining demand and
emerging hopes of a Gaza War ceasefire deal. But recent developments say otherwise: on Sunday, Israel’s security cabinet authorized Prime Minister Benjamin Netanyahu’s government to decide on the “manner and timing” of the response to Saturday’s rocket attack on the Golan Heights that killed 12 teenagers and children. Iran-backed Hezbollah denied responsibility for the attack, which was the deadliest on Israel or an Israeli-annexed territory since an Oct. 7 attack by Palestinian militant group Hamas sparked the war in Gaza. Israel has vowed to retaliate against Hezbollah in Lebanon, and Israeli jets struck targets in southern Lebanon on Sunday.
Corporate News
MFIN: Mandala Finance Prepares Internal Cash to Pay Maturing Bonds IDR 500 Billion
PT Mandala Multifinance Tbk (MFIN) will pay off bonds maturing in the second semester of 2024 with a total value of IDR 500 billion. The bonds will be repaid using the company’s internal cash. The bonds that will mature are Mandala Multifinance IV Sustainable Bonds Phase III Year 2021 Series B worth IDR 150 billion, which will mature on August 6, 2024. In addition, Mandala Multifinance IV Sustainable Bonds Phase IV Year 2021 Series B worth IDR 350 billion will mature on December 3, 2024. “Mandala Finance plans to use funds from the company’s internal cash,” said Managing Director of Mandala Finance, Christel Lasmana, in a statement to Bisnis, Sunday (07/28/2024). Christel explained that the use of internal cash is part of the company’s financial management strategy to ensure financial stability and health. “Until now the company has good liquidity, so the use of internal cash is considered the most efficient option,” she added. (Bisnis)
Domestic Issue
Government Auctions State Sukuk on July 30, Indicative Target IDR 8 Trillion The government will hold an auction of State Sharia Securities (SBSN) or State Sukuk on Tuesday, (30/7/2024). The SBSN series to be auctioned are the SPN-S (Surat Perbendaharaan Negara – Syariah) and PBS (Project Based Sukuk) series with an indicative target of IDR 8 trillion which will be allocated to meet part of the financing target in the 2024 State Budget. In this auction, the PBSG001 series is offered again, which is a green sukuk series offered through an auction in the domestic primary market. The SBSN auction will be carried out using an auction system organized by Bank Indonesia as SBSN Auction Agent. The auction is open (open auction) and uses the multiple price method. However, in its implementation, the submission of purchase offers must go through a Primary Dealer that has been approved by the Ministry of Finance. SBSN SPN-S series will be issued using the Ijarah Sale and Lease Back contract based on the fatwa of the National Sharia Council – Indonesian Ulema Council (DSN-MUI) number 72/DSN-MUI/VI/2008. Meanwhile, the PBS series SBSN will use the Ijarah Asset to be Leased contract based on the DSN -MUI fatwa number 76/DSNMUI/VI/2010. (Pasardana)
Recommendation
US10YT sloped back towards Support from the previous Low level at a yield of 4.144%, when a Doji-shaped candle started a temporary revival of yield until it touched MA20 Resistance. That is the exact Moving Average that is still blocking US10YT’s upside potential: at the current yield of 4.246%. ADVISE: WAIT & SEE; Sideways trend.
On the other hand, on ID10YT there is an attempt to break the Resistance of all three MAs at once and jump the yield to the current 7.08%, although it looks like the 7.003% Gap will be closed again, so anticipate the yield will still be volatile (as well as the price). ADVISE: WAIT & SEE further to ensure the certainty of this break out.
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