Global stock exchanges surged on Wednesday (29/03/23) as markets took heart from greater stability in the banking sector, but most Treasury yields edged higher as uncertainty lingered and bond investors gauged the impact of rising interest rates. On the one hand, the easing of financial system stress evoked greater interest in equity investments; as well as lifting cryptocurrencies and commodity prices. The 2-year Treasury Bond, which is most in line with interest rate expectations, rose 3.9bps to a yield of 4.101%. This is quite a quick rise from the recent 7-month intraday low of 3.555% last Friday as investors sought temporary refuge in safe-haven assets. Meanwhile, the benchmark 10-year US Treasury yield stands at 3.568%.
From the macroeconomic, data showed that Pending Home Sales (Feb.) were higher than expected at 2.3%, increased by 0.8% (though considerably down from Jan. at 8.1%). On the other hand, the Gfk German Consumer Climate (Apr.) data fell deeper than expected -29.2 to -29.5 (also lower than preious -30.6), indicating fairly pessimistic consumer confidence over future economic activity. Elsewhere, a survey showed German consumer sentiment is set to improve in April, thanks to a drop in energy prices, although a full recovery isn’t likely any time soon. European analysts consider the fundamentals of the economy to be healthier now than 6 months ago, thus generating optimism that the banking sector shock can be safely controlled. Markets are now pricing in a 60.8% chance that the Fed leaves interest rates unchanged at the end of its next meeting on May, according to CME’s FedWatch Tool. More important readings from the European continent & the US will be awaited today: German CPI (Mar.), US 4Q22 GDP, as well as Initial Jobless Claims which is predicted to come in at 196k (still growing from previous week’s 191k).
Corporate News
Bank Mandiri’s USD 300 Million Global Bond Issuance Oversubscribed 10.3 Times Bank Mandiri managed to raise funding of USD 300 million or around IDR 4.5 trillion from the issuance of global bonds which will be used for the company’s business development. The global bond has a 3-year tenor with a coupon of 5.5%. In this global bond issuance, Bank Mandiri appointed HSBC, J.P. Morgan, Mandiri Securities, Citigroup, MUFG and Standard Chartered Bank as joint lead managers. This global bond issuance received more than USD 3.1 billion in demand during the orderbook process or oversubscription reaching 10.3 times the amount issued and is the largest oversubscription ever achieved by Bank Mandiri. (Kontan)
Domestic Issue
Bond Market Outlook Ahead of Fed Rate Hike Peak The outlook for the Indonesian bond market ahead of the peak of the Fed’s interest rate hike is predicted to remain bright. Director & CIO Fixed Income Manulife Aset Manajemen Indonesia Ezra Nazula said, stable domestic fundamentals and a strengthening exchange rate are fresh air for the bond market. Nevertheless, Ezra predicts that the yield on 10-year medium-term bonds will drop to 6.5 percent by the end of the year. On the other hand, Fixed Income Analyst of PT Manulife Aset Manajemen Indonesia Doni Kuswantoro in a release said that after the peak of BI interest rates is reached, commercial interest rates including yields on Indonesian state bonds are expected to decline so that it can encourage companies to issue bonds. This is because the need for expansion and refinancing amidst controlled inflation and improved purchasing power will attract companies to issue bonds. (Bisnis)
Recommendation
US10YT is relatively Sideways, yet to budge from between the Support and Resistance yield ranges: 3.502% – 3.677%. The direction of the breakout will determine the next movement of US10YT. ADVISE: Average Up accordingly. ID10YT showed improvement in yield, with MA10 Resistance break, making 6.867% level as the closest Support now. Going forward, ID10YT must prove to be able to stabilize above MA20 Resistance / 6.907% yield, then catch up with the psychological level of 7.0% in order to smoothly continue this short-term uptrend; towards the TARGET which is actually still waiting around 7.057% / 7.189-7.202% yield. ADVISE: Average Up accordingly.
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