Indonesia Fiscal Outlook In Focus, Relatively Steady Yield Trends

INDIA

• With a very light data calendar, India’s bond market remained muted overnight despite recent moves elsewhere as investors wait for Friday’s debt sale and Tuesday’s federal budget.
• 2yr 6.885%
• 10yr 6.964%
• 30yr 7.047%
• Data out showing year to date strong corporate issuance continues with infrastructure and affordable housing dominant.
• Next significant data point to watch will be next week’s PMIs

INDONESIA

• The BI left rates unchanged overnight as expected, commenting that whilst they have capacity to cut, their focus remains on currency stability and that patience is key.
• “The focus of monetary policy in the short-term is directed at strengthening the rupiah exchange rate stabilization and attracting foreign portfolio inflows,” Governor Perry Warjiyo said in a briefing in Jakarta.
• Indonesia’s outgoing president Joko Widodo will appoint Thomas Djiwandono, the nephew of president-elect Prabowo Subianto and his adviser for fiscal issues, as a deputy finance minister later today, multiple sources reported today. Djiwandono has been the main spokesman for Prabowo’s fiscal stance, often reiterating the incoming president’s commitment to abiding by fiscal rules and keeping the 2025 budget deficit under the legal limit of 3% of gross domestic product.
• The front end reacted in the morning session with 2 year yields lower. Elsewhere across the curve, yield movements were muted.
• 2yr Indo 6.545% (-7.5bps)
• 10yr Indo 6.898%

SOUTH KOREA

• A note from a leading global korean investor (Mirae) suggesting that a rise in volatility as a result of US election uncertainty could be a good opportunity to buy Korean bonds.
• With muted market moves overnight, the short end reacted to this seeing 2 year yields down initially 7bps before stabilizing to +1bp on the day to 3.19% on light flows. The 10 and 30yr were relatively unchanged on 3.136% and 3.02% respectively
• With Korean bonds expected to be added to FTSE Russell’s World Government Bond Index (a commonly used benchmark for global investors) and a better than expected fiscal outlook for the economy limiting issuance expectations, Korean bonds could see strong flows in the region into year end.