Fixed Income Update 11 Sep 2025

KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 11 September 2025

Amid Fed’s Dovish Sentiment, Rising Geopolitical Tensions, and The Appointment of a New Domestic Fiscal Conductor

The continued release of weak U.S. labor market data has strengthened expectations of a Fed rate cut next week. Investors are now anticipating as many as 3 x 25 bps cuts by the end of 2025. Unfortunately, while such cuts would typically encourage stronger capital inflows into emerging markets, this positive momentum is being offset by risk-off sentiment following Israel’s attack on Qatar’s capital, which has reignited geopolitical tensions in the Middle East. On the other hand, this development has propelled gold prices to a new all-time high.

In Indonesia, the positive sentiment in the fixed income market driven by the prospect of Fed rate cuts has proven short-lived. The replacement of Finance Minister Sri Mulyani with Purbaya Yudhi Sadewa appears to have tempered market enthusiasm, especially amid the controversies surrounding the transition. Nevertheless, the government’s plan to inject IDR200 tn into domestic liquidity is expected to provide room for stronger economic growth. That said, concerns over the implementation and effectiveness of this policy remain central to how markets will ultimately assess its impact.

 

Regards,
KBVS Research Team

 

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