Today’s Outlook:
ECONOMIC INDICATORS: Investors are hoping to get more clues on the Federal Reserve’s next move in an effort to fight Inflation without hurting the economy too much, aka working the US economy towards a soft-landing. The US Personal Consumption Expenditures (PCE) price index will be released on Friday. Annual growth in the core index is expected to slow in May, but still above the Fed’s 2% target. Market participants will also be watching the first quarter US GDP estimate for the third time, which is due to be released on Thursday. Analysts consider that the biggest concern for the market is stagflation; or in other words, the economy weakens as inflation rises higher. Nevertheless, the market still expects two rate cuts this year, with a more than 60% chance of a 25 basis point pivot in September, according to LSEG’s FedWatch.
FIXED INCOME: The benchmark 10-year US Treasury yield fell 2.7 basis points to 4.23%, from 4.257% at the end of Friday. GLOBAL POLITICAL MAP: Investors will be watching the first US presidential debate on Thursday and the start of French elections on Sunday. US President Joe Biden will face a debate with rival Donald Trump, espousing new policies on immigration and border areas, which his supporters hope will boost his electability among skeptical voters. Meanwhile, France’s far-right National Rally (RN) Party and its allies are seen leading the first round of parliamentary elections with 35.5% of the vote, according to a poll published on Sunday.
EUROPE & ASIA MARKETS: Japan’s top currency watchdog official, Masato Kanda, said authorities will take necessary measures in case of excessive foreign exchange movements, and the addition of Japan to the US Treasury Department’s watch list will not limit their actions. The DOLLAR ended down 0.07% at 159.68 Yen after briefly touching 160. The DOLLAR INDEX, which measures the greenback’s strength against a basket of other major currencies, fell 0.38% to 105.48. EURO was up 0.38% at USD 1.0732.
COMMODITIES: US crude oil futures (US WTI) rose 90 cents to USD 81.63/barrel and BRENT rose 77 cents to USD 86.01; supported by positive sentiment last week of stronger demand indications from the US, the world’s largest oil consumer. Both benchmark oil prices rose about 3% last week after data from the Energy Information Association showed a large decline in US crude stockpiles, thereby indicating healthy demand as the summer driving season begins. The market also received support from deteriorating geopolitical conditions due to the increased risk of a major war between Israel and Hezbollah, which is a continuation of the conflict with Hamas, adding to expectations of supply disruptions in the Middle East. Not to mention the continued clashes between Russia and Ukraine, where Kyiv targeted attacks on major Russian refineries, also fueled concerns over global supply disruptions.
Corporate News
Refinancing, Barito Pacific (BRPT) Offers IDR 1 Trillion Bonds
Barito Pacific (BRPT) will offer bonds worth IDR 1 trillion. The issuance of debt securities is an integral part of the sustainable bonds III with a projection of IDR 3 trillion. So, this year the issuer made by Prajogo Pangestu, released phase III bonds with two series. Series A is priced at 8.25 percent interest per year with a duration of 3 years. Then, series B has a 5-year term with a coupon rate of 9 percent per year. Based on the scenario, interest on bonds is paid quarterly from the date of issuance. Where, the first bond interest will be paid on October 10, 2024. The last bond interest and maturity will be paid on July 10, 2027 for Series A bonds, and on July 10, 2029 for Series B bonds. Bond repayments are made in full at maturity. (Emiten News)
Domestic Issue
Government to Auction SUN Next Tuesday, Target to Raise IDR 33 Trillion Funds
The Ministry of Finance (Kemenkeu) will auction Rupiah-denominated Government Bonds (SUN) to fulfill part of the financing target in the 2024 State Budget on Tuesday today. In this case, the government is targeting to raise IDR 33 trillion. There are seven series of SUN ready for auction, namely SPN03240925 (New Issuance), SPN12250612 (Reopening), FR0101 (Reopening), FR0100 (Reopening), FR0098 (Reopening), FR0097 (Reopening), and FR0102 (Reopening). “The indicative target is IDR 22 trillion, and the maximum target is IDR 33 trillion,” said the Directorate General of Financing and Risk Management of the Ministry of Finance in its official statement, Jakarta, Sunday (23/6). The government offers coupon rates or yields to investors ranging from 6.62 percent to 7.12 percent. The SUN auctioned has a nominal value of IDR 1 million per unit. The SUN auction will be held on Tuesday (25/6) at 09.00 WIB and closed at 11.00 WIB. While the settlement date is Thursday (27/6). The SUN sales will be carried out using an auction system organized by Bank Indonesia. The auction is open (open auction), using the multiple price method. (IDX Channel)
Recommendation
US10YT looks stuck at MA10 Resistance, making yield unable to advance past 4.254%. But once the level is exceeded, then the yield has a chance to strengthen until TARGET: MA20 / yield 4.34%, or even MA50 / yield 4.452%. ADVISE: watch for a break out in yield to determine whether the price weakens or not.
ID10YT is still fairly on track towards the TARGET yield of 7.325%, as soon as it comes off the Resistance level of the previous High: yield 7.243%. ADVISE: HOLD.
Download full report HERE.
