Fixed Income Update 12 Feb 2026
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 12 February 2026
Delayed Fed Easing and Rating Developments Shape Indonesia’s Market Outlook
The US federal budget deficit narrowed to USD94.6 bn in Jan ‘26 from USD128.6 bn a year earlier, supported by stronger revenue collection. Total receipts rose 9.1% YoY to USD559.9 bn, driven mainly by individual income taxes, social insurance contributions, and customs duties, with seasonal factors providing an additional boost. Meanwhile, total outlays grew at a more moderate 2.0% YoY to USD654.6 bn, led by spending on Social Security, healthcare and Medicare, and national defense.
However, the Congressional Budget Office warned that current fiscal policies could widen the deficit by around USD1.4 tn over the next decade, with annual shortfalls projected to rise from USD1.9 tn in 2026 to USD3.1 tn by 2036, potentially pushing public debt above its post-World War II peak by 2030.
Against this backdrop, markets continue to price a higher-for-longer policy stance through 1Q26, with a 79.9% probability that the Fed will hold rates at 350–375 bps in March. The first 25 bps rate cut is now expected in Jun ‘26, followed by gradual easing through September. This delay in easing expectations has supported the DXY Index and kept USDIDR near the upper end of the IDR16,500–17,000 range, while UST yield curves remain positively sloped but consolidating.
In Indonesia, 4Q25 GDP exceeded expectations, driven by strong growth in public administration and government consumption, although January indicators were mixed—FX reserves fell to USD154.6 bn, consumer confidence rose to 127.0, and motorbike sales growth moderated to 3.1% YoY.
At the same time, MSCI’s warning, Moody’s outlook downgrade, and FTSE Russell’s decision to delay index rebalancing warrant close attention, as they have contributed to renewed volatility in domestic financial markets.
Regards,
KBVS Research Team