Profit Taking Pushes Yield FR0091 Up 14 Bps

Profit taking pushes yield FR0091 up 14 bps. Investors took advantage of Cadev Indonesia’s positive sentiment for the May period, which was maintained at USD 135.6
billion. For the record, in April, Indonesia’s Cadev was at the level of USD 135.7 billion. Investors also took advantage of the positive sentiment of subdued US core inflation, and the June FFR hike. The survey showed core inflation in May at 0.5% MoM (Vs. Apr. 0.6% MoM) and 5.9% YoY (Vs. Apr. .6.2% YoY). Meanwhile, the sentiment for a 50 bps increase in the FFR June at the FOMC Meeting next week, has occurred as the probability of a June FFR increase to 1.25% – 1.50% reaches 98%, based on CME FedWatch data.

Corporate Bonds
PPRE: Get IDR 770 Billion Loan. PT PP Presisi Tbk (PPRE) together with its subsidiary PT Lancarjaya Mandiri Abadi (LMA) received a Working Capital Credit (KMK) facility from PT Bank Negara Indonesia Tbk (BBNI) worth IDR 770 billion. Meanwhile, the loan will be used to complete the Cinere-Jagorawi Section 3 toll road construction project with a contract value of IDR 1.21 trillion. (Kontan)

Domestic Issue
Foreign Exchange Reserves Dropped In Three Months. Bank Indonesia noted that Indonesia’s foreign exchange reserves at the end of May 2022 were USD 135.6 billion. This number is down from the position at the end of April 2022 which was valued at USD 135.7 billion and in March 2022 of USD 139.1 billion. This decline was influenced by foreign capital outflows amid risk off sentiment and the payment of government foreign debt. (Kontan)

Recommendation
UST10Y is trading again with a yield of 3%, as the price of Brent crude oil at the level of USD 120/barrel has penetrated again, potentially revising the inflation outlook and increasing FFR. Investors are also keeping an eye on the reopening of recession risks, as a slight yield inversion occurs between UST5Y (3.03%) and UST10Y (3.02%). Yield inversion illustrates that investors are more interested in long-term bonds than short-term bonds, indicating there is potential risk in the near term.

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