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INDON/PHILIP Long-end Spreads Widen, Inflation Falls

ASIA RATES
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Indonesian sov spreads have widen over the past week, as inflation dropped to 2.51% well below estimates of 2.70% which would normally translate into lower yields, however with the Rupiah's continued slide the BI looks to be stuck for the moment. Earlier, Philippines CPI dropped to 3.7% from 3.9% prior missing estimates of 3.9%

  • The INDON curve has bear-steepened over the week with yields 1-10bps higher, while the PHILIP curve twist steepened, yields were +\-5bps, with better buying through the belly.
  • ID-US & PH-US spread diffs tighten 2-6bps in the front-end over the past week, while they drifted 2-5bps wider in the 10yr.
  • Local currencies reached multi-year lows last week with the USD/IDR testing 16500, while the USD/PHP fell just short of testing 59.00.
  • Indonesian lawmakers have approved a 2025 budget deficit target range of 2.29%-2.82% of GDP, lowering the lower end from 2.45% due to increased revenue collection goals. The government aims to boost state revenues by expanding the tax base and streamlining energy subsidies, keeping the deficit below the 3% legal limit. Lawmakers also set a target debt ratio of 37.82%-38.71% of GDP, improving from about 39% this year, while aiming for economic growth of 5.1%-5.5% and maintaining the inflation target at 1.5%-3.5%.
  • Inflation in the Philippines slowed to 3.7% in June, within the central bank's 2%-4% target range, raising the likelihood of an interest rate cut in August as price pressures from utilities and transport eased. The BSP indicated that monetary policy will remain aligned with its goal of stable prices and sustainable economic growth, while keeping an eye on domestic output and potential lingering price pressures.
  • Looking ahead to next week, Philippines Trade balance on Wednesday.
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Indonesian sov spreads have widen over the past week, as inflation dropped to 2.51% well below estimates of 2.70% which would normally translate into lower yields, however with the Rupiah's continued slide the BI looks to be stuck for the moment. Earlier, Philippines CPI dropped to 3.7% from 3.9% prior missing estimates of 3.9%

  • The INDON curve has bear-steepened over the week with yields 1-10bps higher, while the PHILIP curve twist steepened, yields were +\-5bps, with better buying through the belly.
  • ID-US & PH-US spread diffs tighten 2-6bps in the front-end over the past week, while they drifted 2-5bps wider in the 10yr.
  • Local currencies reached multi-year lows last week with the USD/IDR testing 16500, while the USD/PHP fell just short of testing 59.00.
  • Indonesian lawmakers have approved a 2025 budget deficit target range of 2.29%-2.82% of GDP, lowering the lower end from 2.45% due to increased revenue collection goals. The government aims to boost state revenues by expanding the tax base and streamlining energy subsidies, keeping the deficit below the 3% legal limit. Lawmakers also set a target debt ratio of 37.82%-38.71% of GDP, improving from about 39% this year, while aiming for economic growth of 5.1%-5.5% and maintaining the inflation target at 1.5%-3.5%.
  • Inflation in the Philippines slowed to 3.7% in June, within the central bank's 2%-4% target range, raising the likelihood of an interest rate cut in August as price pressures from utilities and transport eased. The BSP indicated that monetary policy will remain aligned with its goal of stable prices and sustainable economic growth, while keeping an eye on domestic output and potential lingering price pressures.
  • Looking ahead to next week, Philippines Trade balance on Wednesday.