Market Brief
Indonesia’s local-currency bond market traded largely sideways yesterday, with government bond yields moving within a narrow and mixed 1–5 bps range across the curve. The 10-year benchmark yield remained broadly stable at 6.14%. The Rupiah strengthened marginally to IDR16,708/USD from IDR16,751/USD the previous day. Secondary-market activity moderated, with outright government securities turnover easing to IDR20.7 trillion from IDR30.0 trillion previously, while corporate bond trading reached IDR1.9 trillion. Meanwhile, Indonesia’s USD-denominated sovereign curve saw yields drift slightly higher, with the Indo-30, Indo-35, and Indo-54 closing at 4.24% (+1 bps), 4.91% (+1 bps), and 5.36% (+1 bps), respectively.
U.S. Treasury yields increased last night as a confluence of developments meaningfully reduced market confidence in a December rate cut, highlighting heightened policy uncertainty ahead of the Federal Reserve’s final meeting of the year. Minutes from the latest FOMC meeting revealed an uncommon degree of division: several officials were open to easing in December if incoming data softened, while “many” preferred to maintain rates through year-end. The probability of a 25-bps cut in December fell to roughly 33%, from nearly 50% earlier in the week, after the Bureau of Labor Statistics announced delays to the October and November labor-market reports—depriving policymakers of crucial data ahead of the December 10 meeting. Investors responded quickly, reducing fed funds futures pricing and scaling back easing expectations as the absence of verified labor-market weakness weakened the case for a third consecutive cut following those in September and October. Additional upward pressure on yields came from a soft USD16 billion 20-year Treasury auction, where the bid-to-cover ratio slipped to 2.41x—well below the prior auction and the six-auction average of 2.73x and 2.66x—suggesting waning demand. These factors collectively pushed Treasury yields higher, with the market recalibrating toward a greater likelihood of a December pause. The 2-year, 5-year, 10-year, and 30-year U.S. Treasury yields closed at 3.59% (+2 bps), 3.70% (+1 bps), 4.13% (+2 bps), and 4.75% (+2 bps), respectively. European yields were mixed: 10-year bund and OAT yields held steady at 2.71% and 3.46%, while the 10-year U.K. gilt rose 5 bps to 4.60%.
Indonesia’s bond yields are expected to remain largely range-bound amid mixed domestic and external signals. Diminishing market expectations of a December Fed rate cut could exert some upward pressure on yields in the near term. However, potential upside in domestic yields may be mitigated by easing currency pressures following Bank Indonesia’s decision to keep its policy rate unchanged at 4.75% yesterday. BI also signaled room for further easing, citing subdued inflation and the need to support growth—factors that could provide an additional layer of support for the domestic bond market.
Fixed Income News
• PEFINDO affirmed PT Adhi Guna Putera’s (AGP) corporate, Medium-Term Notes (MTN), and Long-Term Notes (LTN) ratings at idA with a stable outlook.
• PEFINDO has assigned an idAAA rating with a stable outlook to PT Bank IBK Indonesia Tbk (AGRS).
