Today’s Outlook:
The US CPI report later tonight at around 7.30pm GMT is eagerly awaited by market participants, who expect the US Inflation rate to rise to 3.6% yoy in August, higher than July’s 3.2%; although Core CPI is expected to ease to 4.3% yoy, lower than 4.7% in the previous month.
US Treasury yields remain fairly stable in its position, with the 2-year tenor crawling above 5% ahead of the US CPI data release. Meanwhile, the price of the 10-year bond rose 4/32 putting the yield at 4.2722%, down from 4.288% at Monday’s close. The price of the 30-year tenor rose 15/32 putting the yield at 4.3492%, easing from the previous 4.377% level.
From Continental Europe: The UK reported a much lower than expected increase in unemployment, with only 900 people reporting being out of work in August, but July’s average wage + bonus growth of 8.5% was higher than the 8.2% estimate; this may be due to a surge in job cuts of 207k in July. July’s Unemployment Rate was as expected at 4.3%. Meanwhile the German ZEW Current Conditions (Sept) still views the business climate situation pessimistically, although they are slightly optimistic about the outlook for the next 6 months as reflected in the German ZEW Economic Sentiment (Sept). Overall, the Eurozone also portrayed a relatively pessimistic ZEW Economic Sentiment during the month of September. Today important economic data from the UK will be awaited, namely: GDP (July), Industrial & Manufacturing Production (July), and Trade Balance (July); followed by Eurozone Industrial Production (July) which is predicted to still grow negatively although the weakening has started to slow down.
Commodities: Oil prices rose to near 10-month highs, triggered by the outlook of tight inventories amid rising global demand predictions based on OPEC’s latest report, potentially extending last summer’s profits which might be reflected in the upcoming Inflation pressures. Gold prices slumped to lower than 2-week lows on the back of USD strength.
The Dollar Index, which contains the USD’s position against 6 other major world currencies, rallied as the Japanese Yen retreated on the comments of one of Japan’s top bankers who said that perhaps Japan should end its negative interest rate policy soon. The DXY rose 0.15%, while the Euro fell 0.2% and the JPY slipped 0.37%.
Corporate News
PEFINDO Affirms idA Rating for PT Timah Tbk (TINS) Bonds PT Pemeringkat Efek Indonesia (PEFINDO) affirmed its idA rating for the Sustainable Bonds I and MTN I, as well as idA(sy) rating for the Sustainable Sukuk Ijarah I issued by PT Timah Tbk (TINS) and still outstanding. The ratings reflect TINS’ strong market position, vertically integrated operations, and strong support from shareholders. The rating is limited by moderate financial policies, exposure to the risk of illegal tin mining, and the company’s exposure to tin price volatility. (Bareksa)
Domestic Issue
SR019 Quota Increased to IDR 25 Trillion, Short Tenors Sold Well The Ministry of Finance has revised up the issuance target of the Government Sharia Securities (SBSN) retail sukuk series SR019 to IDR 25 trillion. Referring to data from one of Investree’s distribution partners (midis) on Monday (12/9/2023), the target for issuing three-year SR019 or SR019-T3 was observed to increase to IDR 15 trillion, from the previous target of IDR 10 trillion. Director of Sharia Financing of DJPPR Dwi Irianti Hadiningdyah said that the addition of the SR019-T3 quota was carried out by considering the high enthusiasm of the public to start investing in government bond products. As of Tuesday (12/9/2023) at 13.17 Western Indonesian Time, the three-year SR019 has sold as much as IDR 10.55 trillion or around 70.37% of the target set by the government of IDR 15 trillion. This amount shows that there are still around IDR 4.4 trillion of SRO19-T3 quota that can be purchased in the remaining offering period. (Bisnis)
Recommendation
US10YT appears a bit nervous when approaching Resistance from the previous High yield level of 4.366%; even breaking the yield level of 4.308% seems hesitant. ADVISE: AVERAGE UP should be done gradually after breaking the two levels. TARGET: upper channel around 4,530%.
ID10YT is moving towards the Resistance TARGET of the previous High level around 6.70% – 6.748% yield in this short term bullish trend. If the level is able to be broken, it opens the way for ID10YT to continue the yield increase to the psychological level of 7% yield; up to TARGET from the 7.057% – 7.085% pattern. ADVISE: AVERAGE UP accordingly.
Download full report HERE.
