Today’s Outlook:
US MARKETS: Fed Governor Bowman said on Friday that he is willing to support rate hikes if disinflation stalls, or even reverses; and added that he is monitoring economic data to evaluate whether monetary policy is still tight enough. Bowman’s statement echoed the Fed’s speech last week that called for interest rates to remain higher for longer while considering incoming economic indicators. So far market participants have calculated a 49% chance that the Fed Funds Rate could be cut by 25bps at the scheduled FOMC Meeting in September; up from 48.6% in the previous week.
COMMODITIES: OIL prices closed higher on Friday, ending the week with a win as signs of slowing US inflation boosted rate cut hopes; while CHINA unveiled more stimulus, lending support to projections of increased demand. BRENT futures rose 0.8% to USD 83.92/barrel and US WTI futures gained 0.9% to USD 79.57/barrel. OPEC is also expected to extend the production cut period after June, providing an outlook for tighter supply. Market analysts expect the 8 OPEC member countries that have made voluntary production cuts to extend them by at least 3 months, even before their regular meeting begins in early June. China said it will begin a massive USD 1 trillion bond issuance this week – Beijing’s first major fiscal stimulus measure as the country struggles to shore up a sluggish economic recovery, amid improvements in its manufacturing sector but still accompanied by sluggish Retail Sales & housing sector.
ASIAN MARKETS: CHINA is expected to hold its benchmark lending rate steady on Monday, despite growing expectations of a cut in the benchmark mortgage rate as the government seeks to boost the housing sector.
Corporate News
Waskita (WSKT) Fails to Pay Maturity Bonds Again
Construction company PT Waskita Karya (Persero) Tbk (WSKT) said that it has postponed the payment of interest and principal of Waskita Karya Bond III Phase IV Year 2019 Series B, which will mature on May 16, 2024. WSKT SVP Corporate Secretary Ermy Puspa Yunita said in an official statement that on May 15, 2024, the company was unable to deposit funds to KSEI as the Paying Agent in connection with the 20th (twentieth) interest payment and principal of the Waskita Karya Phase IV Year 2019 Sustainable Bonds III (PUB III Phase IV Year 2019) series B which will mature on May 16, 2024 as agreed in the Trustee Agreement. Based on the provisions of the PUB III Phase IV 2019 Bond Trustee Agreement, if the failure to pay interest is not corrected within 14 working days from the receipt of a written warning from the Trustee, the Company may be declared in default under the Trustee Agreement, and the Trustee at its sole discretion is entitled to call a further RUPO to determine the follow-up to the default against the Company. (Emiten News)
Domestic Issue
Sri Mulyani Releases Samurai Bond IDR 20.51 -Trillion, What for? The Ministry of Finance (Kemenkeu) led by Sri Mulyani Indrawati officially issued Japanese yen-denominated foreign exchange Government Bonds (SUN) or Samurai Bonds worth 200 billion yen or equivalent to IDR 20.51 trillion (Exchange rate IDR 102.57 per Japanese yen) on Friday, May 17, 2024. Director General of Financing and Risk Management of the Ministry of Finance Suminto said the issuance of the Samurai Bond is intended to finance the 2024 State Budget. The proceeds of the Blue Bonds issuance are used to fund projects that are included in the qualifications of blue sector spending or related to maritime affairs in accordance with the SDGs Framework. Meanwhile, the issuance of Samurai Bonds worth 200 billion yen has a tenor of 3 years, 5 years, 7 years, 10 years and 20 years, while the interest rate ranges from 0.99% to 2.55%. This transaction is the 10th consecutive year of Samurai Bond issuance since 2015. Suminto said the issuance of Japanese Yen-denominated Blue Bonds (Samurai Bond) for the second time amounted to 25 billion yen, with part of the 7-year and 10-year tenors, and the entire 20-year tenor. The issuance of the 20-year tenor made history as the Blue Bonds with the longest tenor. (Bisnis)
Recommendation
US10YT will encounter a crucial challenge at MA10 & MA50 around yield 4.434% – 4.45%, before being greeted by the next resistance, namely MA20 at yield 4.50%. In this downtrend that has already formed, it seems difficult to get through this yield; Thus the overall view for US10YT remains a decrease in yield (= increase in price), especially if the support from the previous low level, namely yield 4.31%, is broken back down, this will open up space for further consolidation towards yield 4.247% / 4.08%.
ID10YT rebounded at the lower channel support, although the overall trend is still down. The following obstacle will soon appear on the MA10 & MA20 which are already deadcross = destroying the uptrend platform. Resistance: limited strengthening towards the 7.0% yield as a psychological level.
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