INDON Sov Curve Flattens Ahead Of BI Decision Tomorrow

The Indonesian sov curve has bull-flattened today, yields are flat to 4bps lower. Focus will turn to tomorrow BI rate decision, with some investors taking the view that BI will need to raise rates to counter the falling IDR which has fallen nearly 5.2% against the dollar so far this year, with accelerating declines and underperformance in recent days.

• The INDON sov curve is flatter today, the 2Y yield is unchanged at 5.285%, 5Y yield is 2bps lower at 5.32%, the 10Y yield is 4bps lower at 5.435%, while the 5-year CDS is down 1.5bps at 78bps.
• The INDON to UST spread diff has been fluctuating over the past few days, the 2Y is now 31bps (+2bps), 5yr is 66bps (+3bps), while the 10yr is 82.5bps (-0.5bps)
• In cross-asset moves, the USD/IDR is unchanged 16,238, the JCI is 0.67% higher, Palm Oil is up 1.58%, while US Tsys yields are unchanged
• Focus will be on tomorrows BI rate decision, consensus is for the rate to hold steady at 6%, although there have been a few firms expecting them to raise rates in order to control the fall in the IDR.
• Looking ahead: Focus will turn to BI rate decision on Wednesday.