Today’s Outlook:
US President Joe Biden and Republican lawmaker Kevin McCarthy on Thursday were edging close to a deal to raise the US debt ceiling to avoid an immediate default on June 1, with the parties just USD 70 billion apart on discretionary spending. The threat of default could result in a US credit rating downgrade from rating agencies such as Fitch. From the macroeconomic report, the US revised 1Q23 economic growth to 1.3% (from 1.1% forecast) but indeed weaker than the previous quarter’s 2.6%; and reported jobless claims rose to 229k from the previous week’s 225k, but still below the forecast of 250k. Both readings signaled that the US economy is still strong and dashed hopes of a slowdown in the pace of interest rate hikes next month. Market participants began to calculate a 50% probability of a further rate hike at next month’s FOMC Meeting (from 28% probability previously), as reported by the Fed Rate Monitor Tool. Due to market uncertainty, the 2-year US Treasury yield touched its highest point since last March.
From Europe, Germany announced 1Q23 GDP contracted to -0.2% yoy (recession below expectations and the previous quarter which was still in positive territory, 0.2% and 0.3% respectively). Meanwhile, today will be awaited for Retail Sales (Apr.) figures from the UK as well as some important economic data from the US such as Core Durable Goods Orders (Apr.), Core PCE Price Index (Apr.), Personal Spending, Michigan Consumer Expentations & Sentiment (May).
Bank Indonesia decided to keep BI7DRR at 5.75%, and again expressed optimism for GDP projection in the range of 4.5-5.3% underpinned by more aggressive economic growth in the second half of this year.
Corporate News
KB Finansia (KreditPlus) Offers IDR 1 T Bonds Finance company PT KB Finansia Multi Finance aka KreditPlus is also starting its bond offering. KB Finansia aka KreditPlus is currently holding an initial offering of the KB Finansia Multi Finance Bond II Year 2023. The maximum principal amount is IDR 1 trillion. KB Finansia will use the proceeds from the bond offering to pay off the principal debt of KB Finansia Multi Finance Bond I Year 2022 Series A amounting to IDR 686.39 billion. The bonds, which were released in the middle of last year, will mature on August 2. While the rest will be used by KB Finansia for the company’s working capital in the form of consumer financing. (Kontan)
Domestic Issue
Ministry of Finance Aims IDR 150 T from the Issuance of Retail SBNs This Year The Directorate General of Financing and Risk Management (DJPPR) of the Ministry of Finance (Finance) has increased the target of issuing Retail Government Securities (SBN) by IDR 150 trillion this year. The increase in retail SBN issuance was carried out through the Retail State Bond (ORI) series, Retail State Sukuk (SR), Retail Savings Bond (SBR), and Savings Sukuk (ST), and Cash Waqf Linked Sukuk (CWLS). Director of Government Bonds (SUN) of the Ministry of Finance’s DJPPR Deni Ridwan said the increase in issuance was carried out in accordance with the direction of Minister of Finance Sri Mulyani. He said Sri Mulyani wanted to provide opportunities for investors to invest in retail SBN. This cannot be separated from last year’s increasing demand. He said the achievement of retail SBN issuance continued to increase in 2020, 2021 and 2022 amounting to IDR 76 trillion, IDR 97 trillion and IDR 107 trillion, respectively. (CNN Indonesia)
Recommendation
US10YT looks quite stable on its way to TARGET yield around 3.884%/3.97-4.0% level. ADVISE: Buy, or Average Up accordingly. ID10YT failed to break out of the upper channel resistance (downtrend), and instead fell back below the MA10 & MA20 resistance (making the yield range of 6.417-6.451% the closest resistance at the moment). If ID10YT yield needs a further pullback then the previous Low yield level of 6.35% will be used as Support again. ADVISE: Hold; Wait & See.
Download full report HERE.
