Fixed Income Update 07 Aug 2025
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 7 August 2025
Diverging Yield Paths :
Fed Rate Cut Bets VS Growth Concerns Amid Indonesia’s Resilient Momentum
The global bond market is witnessing diverging yield movements across maturities and geographies. In the U.S., expectations of a September Fed rate cut have gained significant traction, triggering a sharp decline in short-term U.S. Treasury yields. Market participants are increasingly pricing in a more dovish trajectory for the Federal Reserve, especially in light of accumulating signs of labor market weakness and softer macroeconomic momentum. However, long-term U.S. yields have remained relatively stable—if not slightly higher—reflecting concerns over the long-run impact of weakening economic fundamentals. The potential return of Trump-era tariffs, should former President Trump regain office, has also added an inflationary bias to longer-term expectations, limiting the downside for long-dated yields.
Domestically, Indonesia’s Jul ‘25 economy showed moderate inflation, solid trade performance, and stronger-than-expected growth. Jul ‘25 CPI rose 0.30% MoM and 2.37% YoY, mainly driven by the new academic year cycle and volatile food prices. At the same time, the Jun ‘25 trade surplus reached USD4.11 bn, marking the 62nd consecutive month of surplus. In parallel, 2Q25 GDP posted an upside surprise, expanding 4.04% QoQ and 5.12% YoY.
Regards,
KBVS Research Team