Fixed Income Update 02 Apr 2026
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 2 April 2026
Global Spillovers and Domestic Adjustments
Major central banks like the ECB, the Fed, and the BoE are universally holding their interest rates steady, as ongoing inflation and global energy threats make it too risky to start cutting rates anytime soon. The severe spike in oil prices has trapped policymakers in a corner where lowering rates would cause inflation to surge out of control, but raising rates would heavily damage an already fragile economy. Bond investors are now demanding higher returns to compensate for unpredictable global conflicts and stubborn inflation, which ultimately keeps long-term borrowing costs elevated across the globe.
Indonesia’s fiscal position remains constrained, as IDR74.2 tn in efficiency gains provides only a limited buffer against the wide IDR616 tn deficit, while weak tax collection continues to cap fiscal space. Inflation remains relatively contained for now (3.48% YoY in Mar ’26), but risks are tilted to the upside from potential fuel price adjustments, Rupiah depreciation, and El Niño-driven food pressures. External resilience remains the key anchor, with a USD1.28 bn trade surplus (70th consecutive month) supported by downstream and manufacturing exports, cushioning pressures from limited fiscal space and a challenging global backdrop.
Regards,
KBVS Research Team