Fixed Income Update 25 Jun 2026
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 25 June 2026
Global Risk Repricing and Indonesia's Balancing Act
Globally, geopolitical de-escalation has eased market pressures. The formal signing of the 14-point Islamabad Memorandum of Understanding (MoU) and the initiation of a 60-day ceasefire between the US and Iran have significantly reduced global risk premiums. This development triggered a sharp decline in Brent crude oil (down >15% to USD 76.19/bbl) and gold prices (to USD 4,096.25/oz) as safe-haven demand weakened.
However, markets remain cautious regarding the mid-Aug ‘26 deadline for a final nuclear agreement, alongside ongoing Israel-Lebanon tensions and persistent Fed rate hike expectations.
Domestically, Bank Indonesia reaffirmed its pro-stability stance with a 25bps rate hike to 5.75%. This action aims to preserve liquidity and sustain credit growth despite the higher interest rate environment.
Concurrently, the Indonesian government announced an IDR26.34 tn stimulus package for 2H26 to combat external geopolitical pressures. Spanning across three main pillars—consumption and business, employment, and food assistance—the policy is expected to bolster household purchasing power and drive positive sentiment for consumption-driven tertiary sectors such as retail, transportation, and banking.
Furthermore, the equity market faces a critical structural review; MSCI warned of a potential downgrade from Emerging Market to Frontier Market status by Nov ‘26 if recently announced transparency and free float reforms lack tangible and consistent implementation.
Regards,
KBVS Economic Research Team