The USD hit a 6-week high, and Treasury yields rallied after US economic data showed producer-level inflation (Jan.) came in higher than expected, while jobless claims were lower; further pressuring the Federal Reserve to continue maintaining a tight monetary policy to combat the inflation. According to the US Department of Labor, Initial Jobless Claims were recorded at 194K, lower than economists’ forecast of 200K. January’s Producer Price Index (PPI) rose 0.7% MoM vs. the forecast of 0.4%. On an annual basis, PPI advanced to 6% YoY, vs. a survey of 5.4%. The Fed official responded by stating that the next FOMX Meeting (March) may need to implement a higher rate hike, such as 50bps. Treasury yields jumped on the remarks, lowering growth sectors of the market, including consumer discretionary and tech. This discourse might follow the ECB’s decision on a 50 bps rate hike next month, as ECB President Christine Lagarde stated in a speech to EU lawmakers in Strasbourg last Wednesday.
In response to the US macroeconomic data, the 10-year Treasury yield touched its highest point since Dec 30 as investors conidering an increasingly hawkish Fed move. Benchmark US10YT yield rose 5.4bps to 3.861%, from 3.807% at Wednesday’s close. The US Dollar index also rose by 0.15% to 103.95, after hitting a 6-week high of 104.24.
Corporate News
Waskita Karya Postpones the Interest Payment of Shelf Registration Bond III Phase IV. PT Waskita Karya (Persero) Tbk (WSKT) will conduct equal treatment for all debt holders, both working credit and bond holders. As a result of this equal treatment, Waskita postponed the interest payment for Sustainable Bonds III Phase IV. As for now, Waskita is in the process of restructuring, as stipulated in the Master Restructuring Agreement (MRA), as one of WSKT’s strategies in conducting financial restructuring. (Kontan)
Domestic Issue
The Cause of Foreign Funds Exiting the Indonesian SBN Market The amount of foreign funds in the Government Securities (SBN) Market fell again. Based on data from the Ministry of Finance’s DJPPR, foreign funds in SBN were recorded at IDR 809.19 trillion as of February 14, 2023, lower than foreign funds in SBN at the end of January 2023, which amounted to IDR 811.89 trillion. The foreign portion also fell from 15.1% to 14.97% of the total. The decline was caused by the recent sell-off by foreign investors. Looking ahead, the flow of foreign funds into the Indonesian SBN market will depend on the direction of inflation and the benchmark interest rate policy. If dovish, it will be a positive catalyst for the Indonesian bond market. (Kontan)
Recommendation
ID10YT will try to break the Neckline of the bullish reversal pattern, DOUBLE BOTTOM, in the yield area of 6,791-6,80; which will end this Bottoming phase and free up the yield towards TARGET 7.06 / 7,202 / 7,234. ADVISE: Average Up accordingly. The US10YT yield is indeed moving orderly on its way to the previous High level of 3.905, after exceeding the TARGET of 3.832 yield. With conditions in the Resistance area and RSI slightly entering the Overbought region, our best ADVISE is: to Sell on Strength or at least set your Trailing Stop, because it is actually not urgent to sell as yield is still moving above the first Support / MA10 = signaling a strong Uptrend.
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