07 Aug 2023 | News & Feature

UST downgrade and the scent of structural bond re-pricing

  • The surge in UST yields over the past week seems to be concentrated on longer-term bonds, suggesting the expectation of an extended period of elevated interest rates rather than just reacting to the credit downgrade.
  • Lingering inflation risks has led central banks to move away from unconventional policies in 2023, eliminating the premium that had previously suppressed bond yields during the QE era.
  • The prospect of a global bond repricing could potentially impact the Indonesian bond market. Nevertheless, sound fiscal management and continued strong demand from domestic investors should contribute in stabilising the domestic bond market.