US stock indexes ended in negative territory, erasing earlier gains as Treasury yields rose after an auction of 30-year bonds went poorly as sales only reached USD 21 billion, with the final sale of USD 96 billion this week. Markets view the rising bond yields as an alternative investment that is more attractive than equities. On the other hand, the 2- year and 10-year bonds yields curve widened further at 85 points, the deepest inversion since the early 1980s. Thus, reigniting economic concerns even though market participants began to accept that the Federal Reserve must be hawkish again. This inverted yield curve also brought a negative sentiment to bank sector stocks, as the shorter tenor rate is higher than the long tenor, which will pressure the profitability of banking issuers’ lending margin (credit sector). Germany’s inflation rate (Jan.) is still burning at 8,7% YoY (although lower than the forecast of 8.9%, yet higher than the previous month’s 8.6%). Meanwhile, US Initial Jobless Claims managed to rise to 196K, higher than the forecast and the last week’s result.
Corporate News
Lippo Karawaci Repays Global Bond Debt. PT Lippo Karawaci Tbk (LPKR) obtained a syndicated credit facility of IDR6 trillion and made an initial withdrawal of IDR3.89 trillion to repay two senior debt securities totaling USD845 million, equivalent to IDR12.77 trillion. The funds obtained from the syndicated loan based on the syndicated loan agreement will be used to repay the 2025 bonds and 2026 bonds, as explained by the management in the disclosure. (Bisnis Indonesia)
Domestic Issue
Government Bond Yields Decline Supported by Inflow and Easing of Interest Rate Hikes Government bond yields are on a downward trend. The interest rate easing and foreign investors’ inflow into the country’s bonds are the reasons behind the downward trend. The 10-year benchmark bond yield decreased from 6.90% to the lowest level of 6.55% in early February 2023. This decline in yields was driven by the entry of foreign investors into the government bond market. (Kontan)
Recommendation
ID10YT is still consistently undergoing a downtrend, even potentially returning to the Support level of the previous Low of around 6,544. ADVISE: Hold, Wait & See, preparing to reduce position. US10YT yield remain to appear orderly, being on-the-way towards TARGET 3.77. ADVISE: Average Up when 3.692 yield is broken.
Download full report HERE.
