Fixed Income Update 26 Jun 2025
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 26 June 2025
A Fragile Ceasefire
Global economic attention is currently focused on the ceasefire between Iran and Israel, which began on June 24. However, this truce is seen more as a temporary pause than a lasting resolution. While direct confrontations have ceased for now, deep-seated ideological, military, and geopolitical tensions remain unresolved—leaving ample room for renewed escalation. The potential for rapid deterioration continues to loom, particularly as both sides sustain heightened military readiness and maintain networks of proxy actors throughout the region. This backdrop of uncertainty has triggered a global “risk-off” sentiment, with investors retreating from riskier assets in anticipation of increased volatility. Consequently, multiple scenarios are being evaluated regarding the potential consequences of renewed hostilities, including sharp fluctuations in commodity prices—especially oil and gold—and broader disruptions across global financial markets.
Domestically, Indonesia’s 5-year Credit Default Swap (CDS) has declined to 78.19 as of June 25, 2025, down from 82.15 recorded on June 20. The global risk-off environment has impacted Indonesia’s financial transactions data for the period of June 16–19, 2025, as reported by Bank Indonesia. During this period, non-resident investors recorded a net sell of IDR2.04 tn, consisting of net sales of IDR1.78 tn in the equity market and IDR3.72 tn in Bank Indonesia Rupiah Securities (SRBI), partially offset by a net purchase of IDR3.47 trillion in the SBN market. Nevertheless, with the recent ceasefire between Iran and Israel and hopes that the Strait of Hormuz will remain open, there is cautious optimism that capital inflows may return to Indonesia’s financial markets in the coming week.
Regards,
KBVS Research Team