Today’s Outlook:
Most market participants still seem to be holding back as reflected by US stock indexes that are flat again ahead of the release of US Inflation (Apr.) data tonight around 19.30 Western Indonesia Time (WIB), which is predicted to rise 0.4% MoM and 5% YoY; as well as a meeting between US political leaders to discuss the debt ceiling, which currently touches USD 31.4 trillion, before the threat of default becomes a reality as of June 1. The urgency of raising the US government debt ceiling is an important factor to avoid a major blow to the US economy, it also has the potential to greatly weaken the USD as the world’s number one currency, Treasury Secretary Janet Yellen stated.

Economists are forecasting that short-term US Treasuries will be heavily sold ahead of maturity as investors prefer to hold longer-dated bonds ahead of the inflation announcement. The yield on 1-month Treasuries jumped 23.8bps to touch a high of 5.689%; while the 2-month yield accelerated to 5.283%. The focus of market participants on the US CPI data has led them to factor in the possibility that the Fed will keep interest rates high for some time, and dashed hopes of a rate cut this year. The 2-year US Treasury has started to move up 1.2bps to 4.024%. The US Dollar Index also started to advance 0.168% over other major world currencies. On the other hand, the global Gold price is remain still at above the USD2000 psychological level even posting a 0.5% gain at USD2042.9/ounce.

From Asia, Japan reported Household Spending (Mar.) dropped 1.9% YoY; while China managed to grow its Trade Balance (Apr.) surplus to USD 90.21 billion from USD 88.19 billion in the previous month. This above-expected achievement was supported by a higher-than-expected increase in their exports to 8.5%. In the western part of the world, the UK released data on property sector, namely the Halifax House Price Index (Apr.) which turned out to drop far above expectations and even entered negative territory at minus 0.3%, signaling relatively weak housing demand. This afternoon market participants will monitor Germany’s Inflation (Apr.) data as Europe’s largest economy, which is expected to soften further to 7.2%YoY, from 7.4% in Mar.

An encouraging indication of Indonesia’s improving economic condition began to appear, as seen from the Consumer Confidence Index for April 2023; where the reading was 126.1, higher than 123.3 in March.

Corporate News
Failure to Pay, PEFINDO Downgrades Waskita Karya (WSKT) Bond Rating to idD PEFINDO downgraded the rating of PT Waskita Karya (Persero) Tbk (WSKT) Sustainable Bond IV to idD or Default from idCCC. This is due to the company’s inability to pay off the bond coupons due on May 6, 2023. PEFINDO also downgraded WSKT’s rating to idSD or Selective Default from idCCC. (Emiten News)

Domestic Issue
The Impact of US Default on Indonesian Bonds, Market Wait and See The potential default of US debt at least impacts the Indonesian government bond market or Government Securities (SBN), which is on a wait-and-see. Even though the market is waiting for other US economic data, Mirae Asset Sekuritas economist Rully Arya Wisnubroto said the US default would affect domestic investment instruments, especially SBN. Rully added that in the short term, the market will continue to monitor  the development of various US economic data. Regarding the potential US default, Rully said the market would continue to observe the development of negotiations between the government and the US Congress. This greatly impacts short-term USTs, especially those maturing in June and early July, due to fears of a US government debt default if the debt ceiling increase fails to meet an agreement. (Bisnis)

US10YT appears to be holding back from testing MA50 Resistance/yield of 3.543%; before freeing the pace towards the TARGET area of: 3.613-3.644%. ADVISE: Average Up accordingly. ID10YT managed to break the nearest MA10 Resistance after more than a month; opening up opportunities for strengthening towards MA20 at a yield of 6.605% or upper channel Resistance around a yield of 6.636%. If this PARALLEL CHANNEL Downtrend pattern can be broken, it opens the way for TARGET to rise at the yield level of 6.762% (MA50) OR 6.812%. ADVISE: Buy; Average Up accordingly.

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