Fixed Income Update 23 Oct 2025
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 23 October 2025
A Week of Surprises: Gold's Sharp Reversal and BI's Cautious Pause
Markets remains fully pricing in two 25-bps rate cuts from the Federal Reserve, one in October and another in December. This dovish pivot is driven by the economic drag from the prolonged government shutdown, which has caused the UST10Y-2Y yield curve to deepen its inversion, signaling a slowdown. Despite this, the DXY has strengthened as its safe-haven appeal, driven by global uncertainty, outweighs the prospect of lower U.S. interest rates.
Gold prices plunged from record highs, with spot gold falling 5.5% to USD4,115.26/oz as investors booked profits. The sell-off was triggered by a temporary improvement in U.S.-China trade sentiment, which reduced the metal's safe-haven appeal, and coincided with the release of disappointing Chinese 3Q25 GDP data (4.8% yoy) that confirmed a significant economic slowdown.
Domestically, Bank Indonesia’s decision to maintain the BI Rate at 4.75% underscored its commitment to preserving Rupiah stability amid rising inflationary pressures and global policy uncertainty. Despite a widening fiscal deficit, market sentiment toward Indonesian assets remained resilient, supported by steady foreign inflows and strong participation in the latest SUN and SBSN auctions, where yields continued to decline. Nonetheless, global risks arose from the prolonged U.S.–China trade war, which remains unresolved, continues to pose risks to global trade flows and investor sentiment, influencing capital movement into emerging markets such as Indonesia.
Regards,
KBVS Research Team