Today’s Outlook:

US MARKETS: A slower-than-expected US CPI release after 3 months of upward surprises, raising hopes of a faster Fed rate cut and sending US Treasury yields sharply lower. The overall consumer price index slowed to a 0.3% mom rate in April, from 0.4% a month earlier, slower than economists’ forecast of 0.4% (due to falling shelter and gasoline costs), raising hopes that the disinflationary trend is back on track. This changed the annualized figure to 3.4% yoy, in-line with expectations, and down from the 3.5% rate in the previous position. Meanwhile, Core Inflation which strips out volatile food and energy prices, rose 0.3% on a monthly basis and 3.6% on an annualized basis, easing from 3.8% in March. The slowdown in consumer prices was a relief after a day earlier producer-level inflation came out hotter than forecast. Investors see a 50.5% chance that the US central bank will start cutting interest rates in September, according to the CME FedWatch tool. US TREASURY yields fell sharply after the CPI was announced with the 10-year US Treasury yield falling 10 basis points to 4.34%. From other economic data, RETAIL SALES grew flat in April, failing to meet forecasts for a 0.4% increase on a monthly basis; making the annualized figure drop to 3.04% yoy, from 3.83% in the previous period.

MARKET/ANALYST: Evercore ISI thinks Inflation numbers will send US Treasury yields down and Inflation moving towards target. However they expect Nonfarm Payroll could still climb to 150k in May, Unemployment Rate may also stagnate at 3.9%. Wells Fargo & Morgan Stanley think the first rate cut could happen in September, on the other hand Macquarie insists the pivot will not happen this year, more pessimistic than RBC Capital which still holds at least December. Julius Baer Group analysts from Switzerland expect central banks to move their fund positions from US Treasuries to the Gold commodity; which started its gains on Wednesday with futures rallying 1.36% to USD 2392.05/ounce.

OTHER ECONOMIC INDICATORS: Today there will be a number of other US economic indicators such as: Building Permits & Housing Starts which will measure the strength of the US property sector especially in April, while waiting for the weekly Initial Jobless Claims figure which is predicted at 219 thousand (should be down from the previous week 231 thousand). Manufacturing sector activity in the Philadelphia region will also be in the spotlight of market participants, along with Industrial & Manufacturing Production (Apr.). ASIA & EUROPE MARKETS: CHINA central bank keeps 1-year lending rate at 2.5%. EUROZONE released their preliminary Q1 GDP estimate at 0.4% yoy, firming from 0.1% in the previous period. Industrial Production in the region is still struggling to expand as it grew 0.6% mom in March, down from 1.0% in February. Today it’s JAPAN’s turn to announce preliminary numbers for their Q1 GDP which turned out to fall into recession as negative growth of -2.0% yoy and -0.5% mom; down deeper than forecasts of -1.5% and -0.3%, also contrary to the positive position in the previous quarter.

COMMODITIES: OIL prices ended higher on Wednesday, as a much larger-than-expected decline in US weekly stockpiles and a slumping US DOLLAR supported prices and offset the International Energy Agency’s (IEA) outlook for weaker demand growth this year. BRENT futures rose 1% to USD 82.85/barrel, while US WTI futures rose 1% to USD 78.63/barrel. INDONESIA: Indonesia recorded a Trade Balance surplus of USD 3.56bn in April, the 48th consecutive month of surplus, on the back of positive Export growth of 1.72% yoy and Import growth of 4.62% yoy (although not as expected but at least a significant improvement from negative position in the previous month).

Corporate News
BSI Launches Sustainability Sukuk, Offering Rewards of up to 7.20% Bank Syariah Indonesia Tbk (BRIS) or BSI released the first Environmental, Social, and Governance (ESG) principle-based sukuk in Indonesia. The BSI sustainability sukuk or sustainable mudharabah sukuk I Phase I will be issued worth IDR 3 trillion. To attract investors, BSI offers attractive returns in the range of 6.40% to 7.20% per year. The company targets to raise a total of up to IDR 10 trillion in several stages of this sustainable sukuk issuance. The mudharabah sukuk consists of three series with the following details: Series A: The principal amount of Series A bonds with a reward rate of 6.40-7.10% and a term of 370 days. Series B: Principal amount of Series B bonds with a coupon rate of 6.45%-7.15% and a term of two years. Series C: Principal amount of Series C bonds with a fixed coupon rate of 6.50%-7.20% and a term of three years. BSI President Director Hery Gunardi said that in the first phase of this sukuk issuance, BSI has obtained permission from OJK through POJK Number 18 of 2023. (Katadata)

Domestic Issue
Holds Auction of 7 State Sukuk Series, Government Aims for IDR 10 Trillion The government on Monday, May 20, 2024 will conduct an auction of State Sharia Securities (SBSN) or State Sukuk in order to meet part of the financing target in the 2024 State Budget. The State Sukuk series to be auctioned are the SPN-S (State Treasury Securities – Sharia) and PBS (Project Based Sukuk) series. A press release from the Directorate of Sharia Financing of the Ministry of Finance of the Republic of Indonesia on Wednesday (13/3/2024) stated that there are 7 series that will be auctioned on Monday next week. The seven sukuk series have been offered in previous auctions (reopening). The Ministry of Finance set an indicative target of IDR 10 trillion from the auction of the seven SBSN series, with a settlement date of May 22, 2024. The seven series of state sukuk are as follows: SPNS 18112024 (reopening) maturity date on November 18, 2024, SPNS 02122026 (reopening) maturity date February 2, 2025, PBS032 (reopening) maturity date July 15, 2026, PBS030 (reopening) maturity date July 15, 2028, PBS004 (reopening) maturity date February 15, 2037, PBS039 (reopening) maturity date July 15, 2041 and PBS038 (reopening) maturity date December 15, 2049. (Emiten News)


Since US CPI managed to cool down, US10YT Yield is set to drop further after breaking the lower channel support of 4.45% to a consolidation target around yield of 4.08%. ADVISE: reduce position.

ID10YT needs to stay above the short term trendline support around 6.97% yield to maintain this short term uptrend; while trying to break MA10 & MA20 resistance at current yield level of 7.042% – 7.078%. ADVISE: HOLD; WAIT & SEE for BUY ON WEAKNESS opportunity; or decision to reduce position again.

Download full report HERE.