Today’s Outlook:
The US Dollar gained 1.4% over the Euro, Yen and other currencies (the biggest gain since September); however, a number of world stock markets closed down on Friday (12/05/23), as US Consumer Sentiment (May) data fell to a 6-month low. The Dollar Index strengthened over the world’s six major currencies by 0.59%, along with the global crude oil prices that slipped for a fourth week. On On the other hand, the US Congressional Budget Office warned that the US will face a “significant risk” if it defaults on several obligations by the first week of June, without securing a deal to raise its debt ceiling.
The upward trend in interest rates set by the US central bank is starting to show its effect on the economic outlook that is moving towards a recession; but as long as inflation remains persistent, Fed officials will not hesitate to keep raising the interest rate. The benchmark of 10-year treasury yield closed up 6.7bps to 3.464%, as the market considers the Fed will stop the pace of interest rate hikes at the upcoming FOMC Meeting in June. Meanwhile, the 2-year Treasury yield, which often goes hand-in-hand with interest rate expectations, rose 8.3bps to 3.989%.
The UK economy remains weak as 1Q23 GDP data showed growth slowed to 0.2% YoY (vs. 0.6% in the previous quarter); although Industrial Production (Mar.) and Manufacturing Production (Mar.) both managed to grow at 0.7% MoM. Today, Indonesian investors will closely monitor the Trade Balance (Apr) data where surplus is expected to grow to USD 3.38 billion (vs USD 2.91 billion in the previous month).
Corporate News
Pefindo Assigns idAA-Stable Rating on Chandra Asri (TPIA) Bonds PEFINDO assigned “idAA-” rating to PT Chandra Asri Petrochemical Tbk (TPIA) and its bonds. The outlook of the company’s rating is stable. TPIA plans to pay off the Sustainable Bonds III Chandra Asri Petrochemical Phase I Year 2020 Series A amounting to IDR 528.8 billion which will mature on August 26, 2023 using internal funds. As of December 31, 2022, the Company’s cash and cash equivalents were recorded at USD 1.4 billion. (Emiten News)
Domestic Issue
Government to Auction SUN with Indicative Target of IDR 25.5 Trillion The government will hold an auction of Rupiah-denominated Government Securities (SUN) on Tuesday (16/5). In this auction, the government set an indicative target of IDR 17 trillion – IDR 25.5 trillion. Referring to the Directorate General of Financing and Risk Management (DJPPR) of the Ministry of Finance webpage, there are seven series of SUN that will be auctioned starting at 09.00 WIB until 11.00 WIB. The auction aims to fulfill part of the financing target in the 2023 State Budget. The SUN sales will be carried out through an auction system organized by Bank Indonesia (BI). (Kontan)
Recommendation
US10YT is currently in a Sideways trend, trying to get out of the MA10, 20, 50 Resistance in the yield range: 3.442%-3.50%, in order to move forward towards the TARGET yield (short term): 3.613%- 3.644%. ADVISE: Average Up accordingly. By this far, ID10YT has successfully rebounded from the previous Support Low at a yield of 6.40%. If the position is steady above MA10 Resistance / 6.467%, the yield has the potential to advance towards the following Resistance at TARGET: MA20 / 6.548%, followed by the upper channel (Downtrend) at the level of 6.588%. ADVISE: Average Up accordingly.
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