Fixed Income Update 06 Mar 2025
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 6 March 2025
The Momentum of DXY Weakening
Recent U.S. economic data, particularly, the ISM Manufacturing PMI for Feb ‘25 fell into contractionary territory, while the ADP Non-Farm Employment Change came in at just 77K—well below the consensus estimate of 141K and the previous reading of 186K. These weaker-than-expected indicators have bolstered market anticipation of three 25-bps Fed rate cuts along 2025. Although concerns persist over the inflationary impact of Trump-era tariffs and potential retaliatory actions from Canada, China, and Mexico, deteriorating economic fundamentals have become the dominant market focus. Consequently, the U.S. dollar index (DXY) has come under significant pressure, falling to its lowest level since early Nov ‘24.
In the domestic market, capital outflow concerns intensified in late Feb ‘25, driven by governance issues in several government-linked institutions. This led to Rupiah depreciation and a rise in government bond (SUN) yields in early Mar ‘25. However, as these concerns subsided—alongside a weakening DXY—the Rupiah strengthened, prompting a corresponding decline in SUN yields.
Regards,
KBVS Research Team