Fixed InSight
Today’s highlights:
The Fed met market expectation, cutting benchmark rate by -25bps (curr: 3.75%, cons: 3.75%, prev: 4.00%). While Chair Powell gave little direction on further rate cut next year, we are optimistic that more rate cuts will commence, as Powell’s term will end by May’26. Next year, we expect Fed Rate at 3.50% in base case and 3.00% in bull case. The Fed also continued its bond purchase, starting at USD40bn/mo for shor-term tenor. From domestic, Financial Times earlier reported that US-Indonesia trade deal was at risk of collapse. Fortunately, Both sides—USTR and Indonesia’s Coord. Ministry of Economic Affairs—clarified that the talks would continue.
From the bond market, FR 84, 86, 56, and 37 are currently the cheapest based on our yield curve model. Last national business day, the dollar index was closed at 98.79 (-0.4%). Rupiah was depreciated by 0.1% at USDIDR at 16,688. The 10yr UST yield decreased by -4.1bps to 4.15% and 10yr INDOGBR decreased by -1.9bps to 6.19% – the spread between the two was at 204bps.
Economy: The Fed cut benchmark rate, resuming govt. bond purchase (curr: 3.75%, cons: 3.75%, prev: 4.00%)
FOMC voted 9-3 to lower the benchmark rate. Chair Powell said that the Fed already did enough to stimulate economy, in order to fight against unemployment, while it was enough to contain CPI as well. Powell gave little direction on further rate cut next year, but rate hike was not the base case. Furthermore, the Fed would start bond purchase this week, starting with USD40bn/mo for short-term tenor. Source: Bloomberg
Economy: US-Indonesia deal continued to progress
After rumors emerging that the deal was likely cancelled, USTR Greer said that his team was ready to move forward at fast pace, and he would talk with his Indonesia’s counterpart soon. At the same time, according to Indonesia’s Coord. Ministry of Economic Affairs, such dynamics were normal, and it hoped that the deal could be reached soon. Some anonymous sources—coming from Indonesia’s govt.—stated that language harmonization was required for the agreement. Source: Reuters, Kontan
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