Investors Will be Closely Monitoring What Fed Chairman Jerome Powell

Today’s Outlook:
Over the next few days, investors will be closely monitoring what Fed Chairman Jerome Powell delivers at tomorrow’s press conference for clues on the Fed’s next monetary policy direction. Market participants are factoring in two possibilities: either the Fed will end the trend of rising interest rates soon after this month (the much-awaited 25bps hike will be decided tomorrow morning around 01:00 GMT); or there will be another 25bps hike at the FOMC Meeting in the fall.

In terms of economic data, US Consumer Confidence (July) jumped to 117 (a 2-year high), higher than the 111.8 forecast and above June’s 110.1; as optimism about the labor market overcame fears of an impending recession. While from continental Europe, Germany drew a business climate and economic outlook for the next 6 months with a still cheap German Ifo Business Climate Index (July) released lower than expected & unable to exceed the level of June’s reading. Later in the afternoon, France will announce their July Consumer Confidence reading; followed in the evening by the US releasing a series of data from the property sector such as Building Permits & New Homes Sales (june) which will give an idea of the health of the property sector there.

While from the Europe, Germany portrayed the business climate and economic outlook for the next 6 months still gloomy as the German IFO Business Climate Index (July) was released lower than expected & unable to exceed the level of June’s reading. As for this afternoon, it will be France’s turn to announce their July Consumer Confidence level; followed in the evening the US will release a series of data from the property sector such as Building Permits & New Homes Sales (June) which will provide an overview of the health of the property sector there.

Corporate News
Multifinance Bond Issuance Reaches IDR 15.11 Trillion in the First Semester of 2023 Multifinance bond issuance has not been busy in the first semester of 2023. PT Pemeringkat Efek Indonesia (Pefindo) noted that the issuance of multifinance debt securities until the first semester of 2023 reached IDR 15.11 trillion. Pefindo Fixed Income Analyst Ahmad Nasrudin said the figure was slightly below the realization of the same period last year of IDR 15.65 trillion. As for 2022, the value of debt securities issuance by multifinance amounted to IDR 27.08 trillion. Ahmad explained that for the average coupon for the issuance of corporate debt securities offered, most of them had increased and said that the yield on multifinance corporate bonds was quite attractive when compared to Indonesian retail bonds (ORI). (Kontan)

Domestic Issue
Total Bid at SUN Auction IDR 30.99 Trillion, Lower than Previous Auctions The government recorded a total bid of IDR 30.99 trillion in the auction of Government Securities (SUN) which took place on Tuesday (25/7). This amount was lower than the total bid in the previous auction of IDR 47.79 trillion, but reached 2.2 times the indicative target that had been announced. However, the government ultimately decided to win only IDR 13 trillion in demand. This decision was made after considering the reasonable yield of government securities (SBN) in the secondary market, the planned financing needs in 2023, and the current condition of the State Budget (APBN). Director of Government Securities at the Ministry of Finance’s DJPPR Deni Ridwan said that the number of bids at the SUN auction this time was lower because investors tended to wait and see. Market players are waiting for the Federal Open Market Committee (FOMC) Meeting this week which is predicted to raise the Fed Fund Rate. From a domestic perspective, the state budget performance is very good until the first semester of 2023 by recording a surplus of IDR 152.3 trillion (0.71% of GDP). (Kontan)

Recommendation
US10YT is moving comfortably inside the Uptrend channel and has crossed MA20 (making yield 3.87% as the closest Support). With the FOMC Meeting decision coming forward, US10YT yield seems to be steadily heading towards TARGET 4.0-4.091% / 4.20-4.243% (which is equivalent to the previous high of November 2022). ADVISE: AVERAGE UP accordingly.

ID10YT plunged back into the Downtrend channel and below MA20 Support. It is now hanging on to the last hope MA10 at the Support level of 6.22% yield before it has to give up again towards the Support of the previous lowest yield level of 6.187-6.18%. ADVISE: HOLD; be ready to reduce position further. TARGET: 6.295% / 6.32% / 6.39%.

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