Global stocks and bond yields moved in positive territory on Tuesday (11/04/23) as world traders anticipate US benchmark interest rates will soon peak at the upcoming central bank meeting in May. Global gold prices also crawled back above the psychological level of USD 2000/ounce, as the US dollar began to slope, while world oil prices began the climb amid China’s March inflation data, which still weakened back to 0.7% YoY (lower than February at 1%). Investors are keeping a close eye on the US Inflation data due later tonight at around 19.30 GMT, where expectations are that CPI (Mar.) could ease to 5.2% YoY (from 6% in the previous month); up to 5.6% YoY (as reported by Reuters). The PPI (Mar.) aka inflation producer level is also expected to tame to 3% YoY (from Feb. at 4.6%), which data will appear on Thursday. The market is pricing in a 71.8% likelihood that the Fed will raise rates by 25 bps, putting it in the 5.0-5.25% range by the time they finalize the FOMC Meeting on May 3rd, as reported by CME Group Fedwatch. At the same time, the market also expects interest rates to slowly fall to 4.394% by the end of the year as the economy slows and potentially enters a recession; despite Federal Reserve officials often emphasizing that they insist on dragging down inflation to the 2% target.

The IMF cut global economic growth in 2023 to 2.8% and to 3% in 2024 on the premise that high interest rates could dampen business activity, while warning of the threat of recession since the turmoil in the financial system. The US Dollar index retreated 0.322%, while Gold price futures returned to the throne of USD2019/ounce. China’s inflation fell to an 18-month low on weak demand, even their PPI (Mar.) showed disinflation to -2.5% (from -1.4% the previous month). From the Europe, Eurozone investors’ confidence for April seemed to improve, although on the other hand their Retail Sales data for Feb. seemed to show weakness with minus 3% compared to minus 1.8% the previous month. South Korea’s central bank started to hold back on interest rate hikes yesterday; Canada’s central bank is expected to do the same at their meeting this Wednesday.

The 2-year US Treasury yield, which usually moves in tandem with interest rate expectations, rose 2.7bps to 4.035%. The 10-year US Treasury benchmark yield rose 1.3bps to 3.428%, while the 10-year German Treasury yield also rose 0.2bps to 2.305%.

Indonesia’s economic outlook looks brighter as the Consumer Confidence Index rose to 123.3 in March, from 122.4 in the previous month. NHKSI RESEARCH recommends Wait & See, waiting for important economic data from the US which plays a big role in determining the future direction of the bond market.

Corporate News
IKN Project Financing Will Involve Banks and PT SMI The government is preparing a scheme so that the construction and relocation of the national capital (IKN) can involve banks. PT Sarana Multi Infrastruktur (Persero) or SMI will also be involved in the megaproject. The government’s plan to involve banks in financing the IKN project is written in PT SMI’s official statement regarding the issuance of the company’s sustainable bonds. The bonds will support the financing of a number of projects by the company. In the official statement, it is written that the government will encourage SMI to provide financial support in the IKN relocation process. This is the first step in involving the financial sector, especially banks in the IKN Nusantara megaproject. (Bisnis)

Domestic Issue
SUN Auction Results Tuesday, April 11, 2023 The issuance of Foreign investors’ interest in buying Government Securities (SUN) has sharply increased again. However, the government failed to meet the auction target yesterday. The government held a SUN auction yesterday, Tuesday (11/4/2023), for seven series. The total bid received by the government reached IDR 44.99 trillion. This amount jumped 53.3% compared to the previous auction. Of the total incoming bids, those coming from foreign investors were recorded at IDR 9.66 trillion. This amount shot up 59.6% compared to the previous auction. (CNBC Indonesia)

US10YT has perched back above MA10 (making 3.408% yield the closest Support at the moment), and preparing to break MA20 Resistance / 3.455% yield which will free the way for yield to continue rising towards the following Resistance at MA50 / 3.659%; up to 3.7%. ADVISE: AVERAGE UP accordingly. ID10YT is still struggling to end the short-term downtrend within a Falling Wedge pattern. ID10YT first needs to break through the upper wedge resistance at 6.74% yield, before being blocked by a series of MAs in the yield range: 6.753-6.804%. If many break outs are able to happen, then ID10YT yield will get a good wind to swing up towards 7.0% / 7.057% yield; before finally reaching the pending TARGET in the range of 7.189-7.202%. ADVISE: Buy on Break; or Average Up accordingly.

Download full report HERE.