Fixed Income Update 05 Feb 2026
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 5 February 2026
Global Policy & Geopolitical Pressures Persist, Indonesia’s Macro Indicators Stay Supportive
President Donald Trump has appointed Kevin Warsh as the next Chair of the Federal Reserve, ending a prolonged period of uncertainty. While Trump expressed strong confidence in the appointment, markets view Warsh as relatively hawkish, reinforcing expectations of a firm stance on inflation.
Geopolitical risks remain elevated amid rising tensions in the Middle East, despite tentative signals of diplomacy from Iran. Combined with expectations of higher global oil prices, these risks continue to support concerns that global inflation will stay elevated, limiting the scope for earlier or more aggressive Fed easing.
Markets currently price in two 25 bps rate cuts in 2026, in June and October. This backdrop has supported a rebound in the DXY above 97 and contributed to a narrowing in US Treasury yield spreads, signaling early flattening pressures.
Domestically, Indonesia’s S&P Global Manufacturing PMI rose to 52.6 in Jan ‘26 (Prev: 51.2), signaling continued expansion. On the inflation front, Indonesia recorded monthly deflation of -0.15% MoM, while annual inflation increased to 3.55% YoY (Cons: 3.80%; Prev: 2.92%), largely reflecting base effects. Indonesia also extended its trade surplus streak to 68 consecutive months as of Dec ‘25, posting a surplus of USD2.52 bn (Cons: USD2.45 bn; Prev: USD2.66 bn).
Nevertheless, market attention remains focused on the Indonesia Stock Exchange’s response to MSCI investability concerns, particularly amid ongoing reforms and interim leadership changes at the OJK and IDX.
Regards,
KBVS Research Team