Today’s Outlook:
US MARKETS: Economic data that showed public sector job additions in April were below expectations. This raised hopes that the Federal Reserve could start cutting interest rates earlier than expected. The 10-year US Treasury yield fell 6 basis points to 4.511% after NONFARM PAYROLL data showed the US economy added jobs at a slower pace in April, adding only 175,000 jobs last month (the lowest since October 2023), missing the 243,000 forecast by economists polled by Reuters, compared to the 315,000 figure from the revised March. The Unemployment Rate also rose to 3.9% in April, up from 3.8% the previous month, but still the 27th consecutive month below 4%. Average hourly wage growth of 3.9% was the smallest since May 2021 and continues its steady decline towards the mid-3% range, which US central bank officials say is in line with their Inflation target of 2%.
US TREASURY YIELD fell, along with the DOLLAR, after the above Nonfarm Payrolls report where investors have advanced the Fed’s rate cut this year to September, with the market pricing in a 66.8% chance of a cut of at least 25 bps, up from 61.6% in the previous session, according to CME Group’s FedWatch Tool. The yield on the benchmark 10-year US Treasury note fell 6.1 basis points to 4.51%, from 4.571% at the end of Thursday, while the yield on the 2-year note, which typically moves with interest rate expectations, fell 6.5 basis points to 4.8119%, from 4.877%. The 10-year bond fell nearly 17 basis points on the week, the biggest weekly decline since mid December; while the 2-year bond fell about 19 basis points, the biggest weekly decline since early January. MSCI’s worldwide stock index rose 8.67 points, or 1.14%, to 769.19 and gained 0.91% on the week, in line with its second consecutive weekly gain.
Against the Japanese Yen, the DOLLAR was 0.48% weaker at 152.89 while the Pound sterling strengthened 0.1% to USD1.2547. The Greenback has fallen more than 3% against the Yen in a week, the biggest weekly percentage decline since late November. JAPANESE YEN continued its rebound from 34-year lows, ending a tumultuous week in which there were allegations of intervention by Japanese authorities. Traders suspected the Japanese authorities would take action on at least 2 days this week and data from the Bank of Japan showed Japanese officials may have spent around USD 60 billion to defend the sinking Yen.
COMMODITIES: OIL prices fell and are on track for the steepest weekly decline in 3 months after the employment report. US WTI crude fell 1.06% to USD 78.11/barrel and BRENT settled at USD 82.96/barrel, down 0.85%.
Corporate News
Medco Energi (MEDC) Prepares USD 150 Million to Buyback Notes PT Medco Energi Internasional Tbk (MEDC) has prepared funds of up to USD 150 million to buy back two debt securities issued by two indirectly owned subsidiaries of MEDC. The two series of debt securities to be repurchased are senior notes due 2026 with an interest rate of 7.375% issued by Medco Oak Tree Pte Ltd and senior notes due 2027 with an interest rate of 6.375% issued by Medco Bell Pte Ltd. “The total purchase price for the tender offer is as much as USD 150 million, excluding applicable accumulated interest,” said Medco Energi Corporate Secretary Siendy K Wisandana in an information disclosure on the Indonesia Stock Exchange (IDX), Thursday (2/5). Siendy said that the completion of the tender offer depends on the fulfillment of certain conditions, in each case, as amended, replaced, waived or added by the issuers and MEDC. (Kontan)
Domestic Issue
Government Auctions Sukuk Today, Target IDR 10 Trillion Funds The government through the Ministry of Finance (MoF) will auction seven series of State Sharia Securities (SBSN) or State Sukuk on Monday (6/5). The target is to raise funds of IDR 10 trillion. The seven series of SBSN that are ready to be auctioned tomorrow are two series of SPN-S (Surat Perbendaharaan Negara-Syariah) and five series of PBS (Project Based Sukuk) to meet part of the financing target in the 2024 State Budget. “The indicative target is IDR 10 trillion,” said the Directorate General of Financing and Risk Management (DJPPR) of the Ministry of Finance in its official statement, Jakarta, Sunday (5/5). The seven SBSN series auctioned are SPNS 18112024 (reopening), SPNS 02022025 (new issuance), PBS032 (reopening), PBS030 (reopening), PBSG001 (reopening), PBS004 (reopening), and PBS038 (reopening). The yields offered by the SBSNs range from 4.87 percent to 6.87 percent. (IDX Channel)
Recommendation
US10YT is still not going to break the upward trend of the PARALLEL CHANNEL, although perhaps the yield should slope to the Support level of 4.40% which is the defense area of the lower channel (uptrend) along with the MA50 there. ADVISE: BUY ON WEAKNESS.
ID10YT has retraced to 50% FIBONACCI approaching 6.975% yield which may be its closest Support, up to 6.95% where MA20 will also slowly approach up, also providing Support for ID10YT. ADVISE: BUY ON WEAKNESS although a bit speculative; or monitor for a while whether ID10YT will still slip to the next yield support at 6.90% which is FR61.8.
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