Fixed Income Update 06 Nov 2025
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 6 November 2025
Fed Pause, Rising Yields, and the Rupiah’s Near-Term Challenge
The Fed’s 25 bps rate cut was marked by notable public dissent from two hawkish officials, signaling a fractured consensus on inflation risks. As a result, the central bank has adopted a more ambiguous, data-dependent stance, effectively signaling a pause in its easing cycle. Market expectations for another rate cut in Dec ‘25 have diminished, with futures pricing now hovering around a 60% probability, suggesting that interest rates may remain elevated through 1Q26. As the market scales back expectations of aggressive Fed cuts—coupled with signs of improvement in the U.S. labor market—the U.S. dollar (DXY) has strengthened, while U.S. Treasury yields have risen over the past week.
Meanwhile, the growing impact of the U.S. government shutdown has raised additional fiscal concerns, further pushing U.S. government bond yields higher. This movement has also influenced global government bond markets, which have trended upward in tandem.
Domestically, Indonesia’s robust trade surplus and the 5.4% YoY economic growth reported this week were viewed as positive signals. However, rising inflation, the potential continuation of the current account deficit, and the still-weak household purchasing power warrant close attention. These factors could weigh on Rupiah stability, elevate risk premiums and SUN yields, and ultimately constrain Indonesia’s economic growth outlook in the near term.
Regards,
KBVS Research Team