Real Yields Matter
The global bond yields increased significantly, including IndoGb and Indon yields. This was due to rising fuel prices that were expected to inch up inflation. The oil price rose this time due to a supply cut rather than a demand pull. This has created anxiety that the benchmark rate could be raised further than expected as inflation has been an important concern for many countries. The Fed has emphasized that they will stand with a “higher for longer” policy which means the central bank will be still all out to tame inflation and bring the job market to the desired level. The FOMC members see the US economy get stronger which can cause inflation to be stickier. The hawkish stance of the Fed and more US Treasury bond issuance to finance the budget drove bond yields higher. Nevertheless, major central banks including the US, UK, Japan and Switzerland decided to keep rates on hold. Global investors see that the global economy is at the transition point of monetary policy due to lower economic growth and inflation. Hence, we expect there will be more central banks to cut the benchmark rate going forward.
Indonesian government bond issuance is expected to be limited as the state budget is still running surplus until August 2023. Additionally, inflation looks manageable at 2.28% in September 2023 which is quite encouraging after the government reacted fast in combating increasing rice prices. Bank Indonesia (BI) started to issue and trade SRBI (Sekuritas Rupiah Bank Indonesia) in order to absorb liquidity in some banks, attract foreign funds and optimize the assets in BI. The other objective of the instrument is to maintain the currency stability. The recent correction in the bond market should be a good entry point for investors to invest in the bond market.
|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 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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