Market Brief
Indonesia’s local-currency bond market extended its losses at the start of the week, with government bond yields rising by 4–21 bps across the curve. The benchmark 10-year yield climbed 11 bps to 6.91%. In the foreign exchange market, the rupiah weakened further to IDR16,997/USD from IDR16,958/USD in the previous session. Trading activity in government securities softened marginally, with outright transaction volume easing to IDR23.6 trillion from IDR23.7 trillion on Friday, while corporate bond trading amounted to IDR10.4 trillion. Meanwhile, Indonesia’s USD-denominated sovereign bonds traded in a narrow-mixed range, with yields on INDO-31, INDO-36, and INDO-54 closing at 4.69% (+3 bps), 5.31% (+1 bp), and 5.69% (-2 bps), respectively.
U.S. Treasuries rallied on Monday as a sharp pullback in oil prices helped ease near-term inflation concerns, driving yields 4–6 bps lower across the curve and reversing the previous session’s selloff that followed crude’s surge toward USD100/bbl—its highest level since mid-2022. Oil market volatility—stemming from the ongoing U.S.–Iran conflict and supply disruptions around the Strait of Hormuz—remains the primary macro catalyst for global rates markets. After briefly exceeding USD100 during Asian trading hours, WTI crude fell more than 5% to settle at USD93.30/bbl, while Brent closed at USD100.02/bbl, supporting a rebound in global bond markets as inflation expectations moderated. The Federal Reserve is widely expected to maintain its policy rate at 3.50%–3.75% at this week’s meeting. However, market pricing now reflects expectations for only one 25-bps rate cut by year-end, compared with two cuts anticipated prior to the oil price shock. Geopolitical uncertainty continues to cloud the outlook: the International Energy Agency has indicated the possibility of further emergency reserve releases if necessary, while U.S. officials suggest that oil flows through the Strait of Hormuz may continue despite ongoing tensions. Meanwhile, economic data delivered mixed signals, with the Empire State Manufacturing Index declining to -0.2 (versus 3.9 expected) and the prices-paid component falling to 36.6 from 49.6, pointing to some easing in pipeline inflation pressures. U.S. Treasury yields for the 2-year, 5-year, 10-year, and 30-year maturities closed at 3.67% (-5 bps), 3.80% (-6 bps), 4.22% (-6 bps), and 4.87% (-4 bps), respectively. The rally in global bonds was mirrored across major European markets, with 10-year yields in Germany, the UK, and France declining to 2.95% (-3 bps), 4.77% (-5 bps), and 3.62% (-5 bps), respectively, underscoring how energy-driven inflation risks remain the key swing factor for global fixed-income markets.
Pressure on Indonesia’s bond market may ease in the near term, supported by the decline in U.S. and European bond yields as lower oil prices temper global inflation expectations. Market participants will also closely monitor the outcome of today’s Bank Indonesia Board of Governors meeting, where all 30 economists surveyed by Bloomberg anticipate the central bank will keep its benchmark policy rate unchanged at 4.75%.
Fixed Income News
• PEFINDO has affirmed the idAA- corporate rating with a stable outlook for PT Sinar Mas Agro Resources and Technology Tbk (SMAR) and its outstanding bonds.
• PEFINDO has assigned an idAAA corporate rating with a stable outlook to PT Mandiri Utama Finance (MUF).
