Fixed Income Update 26 Mar 2026
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 26 March 2026
Global Uncertainty Anchors Yields Higher
Rates held at 3.50–3.75%; the decision to hold was broadly supported with a stance seen as appropriate to balance employment and inflation goals. The dot plot still signals ~2 cuts for 2026, although a hawkish shift is evident as several officials moved from expecting 2 cuts to just 1, reinforcing that policy is not on a preset course. This keeps UST yields biased upward or sticky, particularly at the front-end, as markets delay aggressive easing expectations.
On the geopolitical front, Trump’s de-escalation narrative remains unverified as Iran denied any talks and the Hormuz disruption persists, leaving a verification gap where oil markets react more to rhetoric than actual flows—keeping risk sentiment fragile with a significant portion of global seaborne supply still constrained.
As a result, the broader backdrop points to a higher-for-longer, risk-off environment, supporting defensive positioning—particularly in Energy, Commodities, and Staples—while keeping pressure on rate-sensitive growth sectors. This environment also limits downside in global bond yields, with UST staying elevated and volatility driven by shifting risk sentiment.
Domestically, Bank Indonesia’s decision to hold the BI Rate at 4.75% and remove forward guidance signals a more prolonged pause to stabilize the Rupiah amid global uncertainty. However, with external pressures still strong, SUN yields are likely to remain elevated, especially on the belly-to-long end, as foreign demand stays cautious despite a relatively anchored front-end.
Meanwhile, Indonesia’s coal output cut to ~600 MT for 2026 reinforces a tightening supply narrative, supporting coal prices, though the impact is uneven across producers and could be further amplified if stricter DMO rules reduce export availability.
Regards,
KBVS Research Team