13 May 2024
Turbulence
April 2024 posed challenges for bond investors due to shifts in the US economic landscape. The US inflation rate surged to 3.5% yoy in March 2024, surpassing the previous rate of 3.2% yoy and the market consensus of 3.4% yoy. This higher-than-expected inflation data made the Federal Reserve cautious about rate cuts. While the market had been forewarned about the challenges of combating inflation in early 2024, progress toward the annual target of 2% remained sluggish in recent months. The Federal Reserve signalled that the current elevated rates would persist, even as market expectations for rate cuts were pushed back.
Throughout April, the Indonesian rupiah depreciated by 2.53%, closing at Rp 16,259 per US dollar. Global and domestic economic conditions, including rising Treasury yields and diminishing hopes for rate cuts, contributed to the rupiah’s weakness. On April 23, 2024, Bank Indonesia raised the BI-Rate by 25 basis points to 6.25%. This move aimed to bolster IDR stability against global risks and maintain inflation within the target range of 2.5%±1%.
The US Treasury yield experienced a sharp spike, surging nearly 50 basis points to 4.70%. This increase posed challenges for riskier asset classes, including Indonesian bonds. The IndoGb yield rose to 7.13%, reflecting the impact of higher US Treasury yields. The yield spread between IndoGb and the US Treasury widened to 250–270 basis points, although it remained relatively modest. These dynamics are crucial for investors, as they reflect risk sentiment and prevailing economic conditions.
In summary, the bond market in April 2024 presented a mix of challenges and opportunities. Inflation, central bank policies, exchange rates and global economic conditions played pivotal roles. For investors, a prudent approach would involve considering short-duration bond funds to navigate the evolving landscape.
Product Recommendation
| FIXED INCOME FUND | |
|---|---|
| MIDU | MIDU invests in Bond Instruments with a Medium-Term segment and is categorized as low to medium risk. Investors bear the risk associated with the Bond Portfolio. |
| IDAMAN | IDAMAN invests in Indonesian Government USD Bonds with a short duration and is categorized as medium risk. Investors bear the risk associated with the Bond Portfolio. |
| MIDO2 |
MIDO2 invests in Indonesian Government Rupiah Bonds with a long duration and is categorized as high risk. Investors bear the risk associated with the Bond Portfolio. |
For More Information
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Mandiri Investasi Website – www.mandiri-investasi.co.id
Moinves Website – www.moinves.co.id
DISCLAIMER
The opinions expressed in the article are for general informational purposes only and are not intended to provide specific advice or recommendations for individuals or specific mutual fund or investment products. It is intended solely to provide education about the financial industry. Views reflected in the content may change at any time without notice. All performance data and investment returns mentioned in this article cannot be used as a basis for calculation to buy or sell a mutual fund. This data is performance records based on historical data and is not a guarantee of future mutual fund performance. Investment through mutual funds carries risks. Investors are required to read and understand the prospectus before deciding to invest through mutual funds.
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