INDON Sov Curve Flattens, Yields Lower on US Rate Cut Expectations

The INDON curve has bull-flattened today, yields are 6-12bps lower. The move lower can be attributed to US data overnight, with retail sales missing estimates with short end rate cut pricing now projecting two 25bp rate cuts by year end (Sep & Dec). There has been very little in the way of local market news, with focus turning to the BI meeting on Wednesday.

• The INDON curve has bull-flattened today, the 2Y yield is 6bps lower at 5.20%, 5Y yield is 9bp lower at 5.07%, the 10Y yield is 11.5bps lower at 5.115%, while the 5-year CDS is 1bp lower at 70bps.
• The INDON to UST spread diff the 2Y is now 48bps (+4bp), 5yr is 73.5bps (+1.5bps), while the 10yr is 79bps (-2bp).
• In cross-asset moves, USD/IDR is down 0.49% at 165,950, the JCI is up 0.95% Palm Oil is 0.96% lower, while US tsys yields are 1-3bps lower
• Foreign Investors have sold Indonesian bonds over the past two session for a net outflow of $371.5m, this ended a 4-day streak of net buying. The overall trend is negative with the 20-day average now -$41m, the 100-day average at -$11m in line with the 200-day average at -$10.5m
• Looking ahead; Bank Indonesian rate decision next Wednesday