Fixed Income Update 29 Jan 2026
KBVS WEEKLY FIXED INCOME UPDATE
Thursday, 29 January 2026
Survival Mode:
Indonesia’s Financial Market Under Dual Global and Domestic Pressures
Escalating US–Iran tensions have intensified global geopolitical risk, reinforcing risk-off sentiment and driving portfolio rotation into safe-haven assets. Gold and silver prices surged to record highs amid rising demand for geopolitical hedging, while concerns persist over potential regional spillovers involving Israel and Saudi Arabia.
In line with expectations, the Fed held rates at 3.50–3.75%, with markets now pricing the first rate cut toward late 2Q26. The recent USD weakness reflects shifting policy expectations after Treasury Secretary Bessent reaffirmed the strong-dollar stance and denied FX intervention, alongside renewed tariff risks and government shutdown concerns that fueled the “sell America” narrative. Meanwhile, elevated UST yields are likely to be moderated by the Fed through ongoing balance sheet normalization and its Treasury bill reinvestment strategy.
Domestically, the JKSE plunged -7.56% in 28 Jan ‘26, marking one of its steepest daily declines, following MSCI’s freeze on Indonesian securities over investability and free-float concerns. This raises risks of index weight reductions and potential EM-to-FM reclassification. Foreign outflows reached IDR6.2 tn, led by BBCA, BMRI, and BBRI. Combined with persistent rupiah volatility, we expect continued downside pressure, heightened volatility, and fragile conditions across Indonesia’s equity and fixed income markets in the near term.
Regards,
KBVS Research Team