Fixed Income Update 07 May 2026
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 7 May 2026
Global Risks and Domestic Resilience
Geopolitical Tail-Risks & Energy Market Correction. The escalation of the US-Iran conflict via the "Project Freedom" launch triggered a surge in market volatility, driving the VIX to a peak of 18.81 and pushing Brent crude to the USD114–118/bbl range. However, the operational pause on May 6 catalyzed a sharp relief rally, forcing a correction in Brent crude down to USD103.34/bbl and cooling the VIX to 16.75.
On domestic side, Indonesia’s GDP outperformed expectations with 5.61% YoY growth in 1Q26. This expansion was fueled by a significant 21.81% surge in government consumption and strong seasonal demand in the services sector during Ramadan and Lebaran.
Headline inflation moderated to 2.42% YoY in April, aided by a sharp decline in personal care costs. However, the Rupiah has weakened (IDR 17,200–17,400/USD), prompting Bank Indonesia to likely maintain steady interest rates to manage imported inflation and protect real yields.
The trade surplus reached USD3.32 bn in March, marking 71 consecutive months of surplus. While coal exports recovered due to resolved administrative hurdles (RKAB), a surprising deceleration in capital and consumer goods imports suggests a cautious domestic investment climate.
The MoF is preparing a windfall profit tax on nickel and coal to offset rising energy subsidy costs. While it could generate IDR80 tn and stabilize the fiscal deficit (Bull Case), it carries risks of capital outflow and negative sentiment in the mining equity sector (Bear Case).
Regards,
KBVS Research Team