Bond Market Commentary : August 2023

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Bond Market Commentary : August 2023

Bouncing Yields


The global bond market was surprised in August 2023 as the US Treasury yield jumped above 4.2% driven by Fitch’s US rating downgrade, yield curve control adjustment by Bank of Japan and the Fed’s hawkish statement in the Jackson Hole symposium. Fitch downgraded the US rating due to the debt ceiling agreement in May 2023 that allowed the US government to conduct more bond issuance. Japan previously imposed yield curve control (0% – 0.5%) for quite some time to induce inflation to 2%. Lately, the Bank of Japan has tweaked the policy to allow 10-year Japanese government bond yield to rise above 0.5% up to 1% because inflation is stable above 3%. The last is from the Fed which made a hawkish statement due to the resilient labour market during the summer. These combinations have brought the US Treasury and IndoGb yield increase significantly in August 2023. The US Treasury yield reached 4.4% from 4% and the IndoGb 10-year yield rose to 6.7% from the previous 6.2%. However, the spike did not last for long as the US PCE inflation came up as low as expected and the US labour market cooled.


Bank Indonesia introduced SRBI (Sertifikat Rupiah Bank Indonesia) to attract foreign funds flow and optimize the government bond owned by BI. This is a sign that liquidity in the banking system for the time being is still ample because companies are likely more keen to use internal cash than bank loans. Therefore, we see the bond yield can be maintained stable for the next few months.


Product Recommendation


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 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.


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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.

Written by

Willy Gunawan

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