Today’s Outlook:
US MARKETS: Investors are on edge about the release of Nonfarm Payroll (NFP) & Unemployment Rate data this Friday (06/10/23). Both data play a role in shaping the Federal Reserve’s decision on whether to raise rates at next month’s FOMC Meeting. Initial Jobless Claims data released on September 23rd again resulted below expectations, in which there were only 207 thousand jobless claims compared to market estimates at 210 thousand, but this figure was still an increase from the previous week at 205 thousand. As for NFP, the US economy is expected to have created about 170k jobs in September, with Wage Growth likely to have ticked up by 0.1% for the month, but remain steady in the 12 months through September. There have also been strikes from UAW members at the big three US automakers recently; yet these will not be reflected in the NFP data. Treasury yields retreated again on Thursday (05/10/23), though remain at 16-year high as investors wary of upside to resume as a stronger jobs report on Friday’s labor data could signal that the Fed has more work to do restrict growth. San Francisco Fed Bank President Mary Daly said at the Economic Club of New York that with the current restrictive US monetary policy and the recent rise in US Treasury yields, the Fed may not need to raise rates any more. In addition to macroeconomic data, market participants are also still alertly monitoring the issuers’ Q3 earnings reports as a market sentiment factor.
US ECONOMIC DATA: The US reported an increase in Exports and a decrease in Imports during August, moving their Trade Balance to a deficit of USD 58.3 billion. This figure was lower than the market forecast (USD 62.3 billion deficit) and also from the previous month’s deficit (USD 64.7 billion). Nonfarm Payroll data which has been the focus of investors worldwide is expected to come in at 170k for September, down from 187k in August. Average Hourly Wage growth in September is predicted to remain unchanged. Last but not least, the Unemployment Rate (Sept), which is predicted to continue to show the strength of the US labor market by showing 3.7%, down slightly from 3.8% in the previous month.
ASIA MARKETS: South Korea announced CPI (Sept.) at 3.7% yoy, a slight increase from predictions and August reading of 3.4%. Meanwhile, foreign investment in Japanese bonds and stocks appeared to increase significantly as net buying was detected compared to massive selling in the previous period. On the one hand, Japanese household spending for August was detected to have increased significantly above expectations. Japan accumulated Foreign Exchange Reserves (Aug.) at USD1,237.2 billion, both slightly decreased by around USD14 million from the previous month. Later around 10.00 am GMT, Indonesia will release their Foreign Exchange Reserves data, which will be compared to our last position at USD137.1 billion.
EUROPE MARKETS: On the other hand, Germany was able to score a Trade Balance surplus of EUR16.6 billion, better than the EUR15 billion estimate, although on both fronts August’s Exports & Imports appeared to drop more than expected, but at least the decline has been slower than the previous month. Talking about September’s Construction PMI: Germany, the Eurozone and the UK are still sinking deeper into contraction territory. This afternoon, German investors will monitor German Factory Orders (Aug.) data which is expected to bounce back significantly by 1.8% mom, from -11.7% in July.
COMMODITIES: Global crude oil prices retreated another 2% on Thursday, extending the previous 6% decline, as the market was disappointed by the absence of any new announcements on production cuts at the recent OPEC+ meeting held on Wednesday. The price of WTI (New York) for November contract is now at USD82.31/barrel, dropping 2.3%, while Brent (London) for December contract fell 2% to USD84.07/barrel; both had hit a 5-week low before closing with a slight rebound. The soaring USD exchange rate since July and the US Treasury yield are also the culprits for the fall in USD-denominated crude oil prices.
Corporate News
Hary Tanoe’s Coal Issuer Offers Bonds, Seeks IDR 500B Coal issuer owned by Indonesian conglomerate Hary Tanoesoedibjo, PT MNC Energy Investments Tbk (IATA), offers sustainable bonds I phase I year 2023 worth IDR 500 billion which consists of 3 series. The principal amount of series A bonds offered is IDR 250,000,000,000, with a fixed interest rate of 10.75% per annum. The bond term is 370 calendar days from the issuance date. The principal amount of series B bonds offered is IDR 149,825,000,000 with a fixed interest rate of 11.25% per annum. The bond term is 3 years from the issuance date. Moreover, the principal amount of series C bonds offered is IDR 100,175,000,000 with a fixed interest rate of 11.50% per annum. The bond term is 5 years from the issuance date. (CNBC Indonesia)
Domestic Issue
The Bond Market’s Future until the End of 2023, Pressured by the Fed’s Interest Rate Uncertainty The uncertainty of the US Central Bank (Fed) benchmark interest rate is predicted to still suppress Indonesia’s bond market performance. Permata Bank Chief Economist Josua Pardede said that the uncertainty of the Fed to raise its benchmark interest rate again has had an impact on the 10-year US treasury yield. Based on Investing data, Thursday (5/10/2023), the US bond yield rose 0.61 percent to 4.7 percent. This also made the yield on Indonesia’s 10-year SBN jump up to 1.31 percent or 0.092 points to its highest level of 7.12 percent. Meanwhile, this global sentiment is predicted to subside in November 2023 or when the Fed is expected to lift its benchmark interest rate again. Indonesian bond yields, said Josua, are predicted to be much lower to the 5 percent range in 2024 along with the projected reduction in the Fed’s benchmark interest rate next year. (Bisnis)
Recommendation
US10YT has not been able to move on from the upper channel support, if it breaks further it will test the MA10 support at 4.651% yield. ADVISE: Wait & See, whether the first Support holds or not. Need to consider preparing to reduce positions (gradually) if Support is broken one by one.
ID10YT finally formed a Dark Cloud-like candle in the Resistance/Target area, while RSI consistently negative divergence; indicating a stronger possible trend reversal. ADVISE: need to be more considered to SELL ON STRENGTH, at least reduce the position even though the Uptrend is still moving above MA10 (= yield 6.962% so Support).
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