Today’s Outlook:
Federal Reserve Chairman Jerome Powell calling for a further two rate hikes this year to push US inflation to the 2% target. These hawkish comments sent Tech stocks into the red, with the Philadelphia SE Semiconductor Index dropping 2.7%; as market participants priced in a 74.4% probability of a 25 bps rate hike at the upcoming FOMC Meeting in July, as reported by CME Group FedWatch. On the other hand, the Energy sector managed to rebound from its biggest monthly decline. From the Europe, the Bank of England has so far failed to control UK Inflation as the May CPI rate was released unchanged at 8.7% YoY, which failed to meet expectations of a drop to 8.4% YoY. No wonder that the Bank of England will be in the spotlight today regarding the benchmark interest rate decision which is allegedly going to rise 25 bps to 4.75%. Not only the UK, today’s Bank Indonesia Board of Governors Meeting will also re-determine the BI7DRR rate which is predicted to remain at 5.75%. Meanwhile, US investors will still closely monitor Jerome Powell’s second comments before the US Senate Banking Committee later tonight at around 21:00 WIB, before being preceded by the release of weekly Initial Jobless Claims and Existing Home Sales (May) data.
Corporate News
KB Kookmin Subsidiary Issues IDR 1 T Bonds, Oversubscribed 4 Times PT KB Finansia Multi Finance or KreditPlus issued the largest bond of IDR 1 trillion. The bonds issued by the subsidiary of KB Kookmin Card from South Korea managed to get an AAA (idn) rating. During the initial offering or bookbuilding period, the bonds received a positive response from investors, with demand reaching IDR 4.08 trillion or oversubscribed 4 times from the issuance plan. The structure of the bonds issued consists of 2 series, namely Series A of IDR 500 billion with a tenor of 1 year and a fixed interest rate of 6.20% per annum, and Series B of IDR 500 billion with a tenor of 3 years and a fixed interest rate of 7.30% per annum. (Detik Finance)
Domestic Issue
Corporate Bond Prospects for Semester II/2023 while the Fed is Still Hawkish Several issuers issued corporate bonds even though the Federal Reserve or the Fed is expected to raise the benchmark interest rate in semester II/2023. Associate Director of Fixed Income Anugerah Sekuritas Ramdhan Ario Maruto said the prospects for corporate bonds are still bright as there are many issuers that need funds for expansion and debt settlement after being hit by the Covid-19 pandemic. In addition, the relatively stable domestic macroeconomic conditions also support the issuance of corporate bonds. “Because domestic liquidity is quite good, it has finally suppressed SBN yields so that the difference with the US Fed Fund Rate is narrower than the period 3-4 years ago, and this is quite good for market growth” said Ramdhan. However, according to him, corporate bonds cannot be separated from the track record of the issuer, given the many cases of default on bond coupons by obligors. (Bisnis)
Recommendation
US10YT is still unable to bounce after breaking short-term support & currently the yield is moving below MA10 & MA20; making the yield level of 3.732-3.761% the nearest resistance at the moment. ADVISE: Hold (reduce position); Wait & See. The following yield support: MA50/around 3.625%. ID10YT is currently moving comfortably to the following TARGET/resistance which is MA50 around 6.47% yield and the TARGET of the broken PARALLEL CHANNEL (downtrend) pattern, ] around 6.5% yield; after successfully breaking MA20 Resistance (making the yield level of 6.361% as the current closest Support). ADVISE: Average Up accordingly.
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