The Indonesian 10-year bond yield is unchanged on Friday despite weak exports figure in March. The benchmark 10-year bonds yield, which moves inversely to its price of bonds stood at 7.422 pct as compared to 7.419 pct on Thursday by 0842 GMT.
The March exports figure tumbled 14 pct y/y, against market expectation of 14.04 pct y/y, from 7.2 pct y/y decline in February. March Imports were also down 13.1 pct, against market consensus of 12.02 pct, as compared to 11.7 pct in February and oil and gas exports fell 38.2 pct y/y, from 36.5 pct y/y in February, indicating weak domestic demand and resulting in a trade surplus of USD 1.65bln. We expect the Bank Indonesia’s easing trend to continue in 2016 due to ongoing weakness in China and the Eurozone.
“With the 25bps rate cut last week, the Bank Indonesia has now cumulatively cycle. We see scope for another 25-50bps in the up-coming policy meet”, said ANZ in its latest report.
We foresee that the Bank Indonesia is unlikely to ease at the monetary policy meeting which is due on Thursday, having already cut rates by a total 75 bps since January. This is consistent with the assessment that recent CPI figures have improved a bit -CPI edged up to 4.5 pct y/y in March from 4.4 pct y/y in February
Meanwhile, the Bank Indonesia governor Martowardojo said recently that the central bank still has room to ease monetary policy, adding that Bank Indonesia would be data dependent albeit more cautious in future policy decisions.
Lastly, if exports, inflation and GDP growth fail to improve over the coming months, easing will occur sooner rather than later, pushing bonds prices further up.
