Today’s Outlook:
Global stocks and US Treasury yields rose on Friday following the release of US employment data which still rose above expectations, giving rise to speculation that the Federal Reserve will continue its upward trend in interest rates. The US employment data still showed growth (Nonfarm Payroll released at 339k, vs forecast 180k & previous 294k); however the unemployment rate has reached a 7-month high of 3.7% (vs 53-year low of 3.4% in April). This means that there is an increase in labor supply, which will eventually depress wage growth and inflation. It is evident that hourly wage growth during May was recorded to have weakened below expectations. This data brought relief to investors on their expectation that the Fed will have a strong reason to hold off on raising interest rates at the upcoming FOMC Meeting on June 13-14. The market has priced in a 71.3% probability, as reported by the CME Group FedWatch Tool.

In terms of the US debt ceiling, the US Senate finally passing an agreement to raise the US debt ceiling which has reached USD31.4 trillion, provides the answer that market participants have been waiting for to avoid a catastrophic default. The CBOE Volatility Index, which implies the financial market fear index, finally deflated as well to its lowest point since November 2021.

With two sides of expectations regarding interest rates, it inevitably brought the 10-year US Treasury yield to 3.965%; while the more sensitive 2-year tenor is perched at 4.509%. Meanwhile, Gold prices slipped 1.5% to USD 1948.11/ounce; as the US Dollar Index crept up 0.483%.

Indonesia Inflation Data (May) is predicted to contribute positive sentiment today, if the estimate of 4.23% can be realized, then it means that the figure is down from the previous month at 4.33%.

Corporate News
Maturing, IDR 726 Billion Bonds of Sandi Uno’s Gold Mine (MDKA) Receive idA+ Rating The Indonesian Securities Rating Agency (Pefindo) assigned Merdeka Gold’s debt securities worth IDR 726.35 billion with an idA+ rating. The sustainable bonds I Phase I 2020 Series B will mature on July 30, 2023. The gold mining issuer made by Sandiaga Uno, will pay off the maturing bonds using internal cash. (Emiten News)

Domestic Issue
Consider Bond Market Opportunities at the End of Interest Rate Hike Cycle The outlook for the bond market is improving along with the end of the Bank Indonesia (BI) interest rate hike cycle and the potential for a more accommodative Fed Funds Rate policy. “These two catalysts can encourage further strengthening of the bond market. Historically, the Indonesian bond market offers attractive performance potential following a pause in interest rate hikes,” said PT Manulife Aset Manajemen Indonesia Investment Specialist Dimas Ardhinugraha. The impact of aggressive monetary tightening in 2022 will only be reflected in the real economy in 2023. Market volatility in the first quarter of 2023 reinforces the strategic view that market fluctuations will still be high throughout the first half of 2023. Market sentiment is expected to improve in the second half of 2023 as the economic downturn has been digested by the market and attention turns towards the potential for more accommodative monetary conditions. (Katadata)

US10YT seems to have to test MA10 Resistance in the range of 3.73% yield; in order to be on the way to bullish Targets at the following yield points: 3.83-3.86% / 3.97 4.0%. ADVISE: Buy; Average Up accordingly.

ID10YT has not yet managed to break the channel pattern (downtrend) and a number of MA, placing the nearest Resistance level in the yield range: 6.423-6.488% . ADVISE: Buy on Break; or Average Up accordingly. TARGET: MA50/6.60%, and then 6.69-6.75%.

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