Fixed Income Update 17 Apr 2025
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 17 April 2025
TRUMP FLIP-FLOP ON TARIFF
Over the past week, President Donald Trump has implemented several abrupt shifts in U.S. trade policy, most notably suspending tariffs on smartphones, laptops, and certain automobile imports just days after having imposed them. This move has sparked speculation regarding potential exemptions for other product categories. These developments coincided with the release of weaker-than-expected U.S. labor market data and a decline in the Consumer Price Index (CPI) for Mar ‘25. Simultaneously, concerns arose over reports of significant sell-offs by Japan and China, driven by the newly imposed Trump tariffs and growing fears of a potential U.S. economic slowdown. In addition, the U.S. dollar index (DXY) has weakened sharply, marking its worst two-month performance since 2002. This pronounced depreciation reflects a growing loss of investor confidence in U.S. assets, further complicating the outlook for fixed income markets. On the other hand, this situation has increased the likelihood of an earlier-than-expected Federal Reserve rate cut. Optimistic commentary from Scott Bessent has also helped calm market sentiment, contributing to a decline in U.S. Treasury yields since the start of the week.
President Trump’s policy reversals have also introduced a heightened degree of volatility in domestic financial markets. Nevertheless, the exemptions already granted — along with the potential for additional exemptions — have had a positive impact on the Indonesian economy. This has been further supported by an increase in Indonesia’s foreign exchange reserves, which rose by USD2.54 bn at the end of March 2025 to a record-high level of USD157.1 bn.
Regards,
KBVS Research Team