Today’s Outlook:
US MARKET SITUATION: Investors in general expect the US Federal Reserve to cut interest rates at its September meeting after Fed Chairman Jerome Powell’s support expressed readiness to adjust monetary policy going forward. The CME FedWatch Tool currently sees a 64% chance of a 25 basis point cut and a 37% chance of a 50 basis point cut. The US PCE PRICE INDEX for July, due for release on Friday, may provide further insight into the central bank’s likely rate cut path.
MACQUARIE: Without a Federal Reserve interest rate cut, the US is more likely to go into recession, Macquarie analysts noted after signs of a weakening labor market became apparent in the latest US Consumer Confidence report. Respondents reported that job supply fell to 32.8% from 33.4%, while those reporting jobs were hard to come by rose to 16.4%. This spread, which follows the unemployment rate, is now at its widest since March 2021, when unemployment stood at 6.1%, Macquarie observed.
MARKET SENTIMENT: Tonight market participants will monitor the preliminary estimate of 2Q US GDP with an expected 2.8% qoq which is double the economic growth from the previous quarter’s 1.4%; don’t forget also the weekly Initial Jobless Claims every Thursday will shape the market’s view on labor market conditions.
EUROPEAN MARKETS: will be fixated on the preliminary GERMAN CPI (Aug) figure which is expected to ease further to 2.1% yoy (from 2.3% in the previous month), on track towards the 2% target of the ECB.
COMMODITIES: Oil prices fell 1% on Wednesday after a smaller-than-expected drop in US crude stockpiles and concerns over Chinese demand persisted, although losses were limited by supply risks in the Middle East and Libya. Brent crude oil closed down 90 cents, or 1.13%, at USD 78.65 per barrel. US West Texas Intermediate crude fell USD 1.01, or 1.34%, to USD 74.52. Chinese demand concerns also continued to weigh on prices as recent data showed a struggling economy and slowing oil demand from refiners. The potential loss of Libyan oil production and the possibility of the Israel-Gaza conflict spilling over to include Iranian-backed militants from Hezbollah in Lebanon remain the biggest risks to the oil market, which limited price declines on Wednesday.
Corporate News
Indonesia Infrastructure Finance (IIF) Will Pay Matured Bonds IDR 163 Billion
PT Indonesia Infrastructure Finance (IIF) is cleaning up its debt. The company is preparing funds to pay for sustainable bonds I phase I 2019 series C worth IDR 163 billion. The 2019 sustainable bonds will mature on December 18, 2024. IIF, as quoted from a Pefindo release on Wednesday (28/8), plans to pay off the maturing bonds using internal funds. As of July 31, 2024, the company has cash and cash equivalents and securities of IDR 1.5 trillion, plus unused bank facilities worth IDR 4 trillion. At the same time, IIF is conducting a tender offer for its 2026 bonds. The notes are senior unsecured notes with a principal value of USD 150 million and a fixed interest rate of 1.5% per annum. Director of Indonesia Infrastructure Finance (IIF) Rizki Pribadi Hasan explained in a stock exchange filing on Wednesday (28/8) that the notes will mature in 2026. “We have started a cash tender offer to buy back the 2026 bonds with an amount of up to USD 50 million,” he explained. (Kontan)
Domestic Issue
South Sumatra Potentially Issues Regional Bonds
South Sumatra Province (South Sumatra) is considered to have the potential to issue regional bonds to ease the burden on the budget for infrastructure development implementation in the APBN and APBD in the region. This was revealed by the Head of the Economic and Development Funding Division of the South Sumatra Regional Development Planning Agency (Bappeda), Hari Wibawa, Wednesday (28/8/2024). “Yes, it is possible,” he told Bisnis. According to Hari, infrastructure development through bond schemes in South Sumatra has not been realized until now. This includes mapping the challenges that may arise in implementing the model. However, he admitted, South Sumatra is in the process of exploring projects that have the opportunity to use the bond scheme. “Now we are still in the process of exploring which (projects) can be done through the bond scheme with the assistance of the Coordinating Ministry for Economic Affairs,” he added. One of the existing opportunities for bond issuance is the development of Siti Fatimah Hospital (RS) located in Palembang City. He added, apart from being an alternative in reducing the burden on the APBN and APBD budgets. He assessed that the issuance of bonds for infrastructure development also has advantages such as a longer repayment period. “And the interest may also be lower,” he said. Hari emphasized that the exploration of project funding through bonds had also received direction from the Acting Governor of South Sumatra. (Bisnis)
Recommendation
US10YT has not been far from the Support yield region in the phase of waiting for US PCE PRICE INDEX data which will be released this Friday. A break of MA10 & MA20 Resistance above 3.86% yield will only create a little room for strengthening towards 3.97% – 4.0%. ADVISE: anticipate a limited downside potential in the price anytime soon.
ID10YT has not been able to “move on” from MA10 / yield 6.65% which is currently the closest Resistance, in order to avoid further consolidation towards the bottom target around 6.53%. POTENTIAL: downtrend down yield is still intact, price may still rally limited.
Download full report HERE.
