Indonesian bonds trade mixed ahead of the BI policy decision

The Indonesian government bonds traded mixed Thursday ahead of Bank Indonesia’s monetary policy decision, which is scheduled to be released today at 09:00 GMT.

The yield on the benchmark 10-year bonds, which moves inversely to its price, fell 3-1/2 basis points to 6.937 percent, the yield on super-long 30-year bond remained flat at 7.615 percent and the yield on short-term 3-year note slid 1-1/2 basis points to 6.609 percent by 05:30 GMT.

Bank Indonesia will hold its monetary policy meeting on September 22 and it is widely expected to lower its benchmark interest rate further by 25 basis points to record low of 5.00 percent as the current stage of persisting deflation opens door to a series of rate cuts.

Further, deflationary pressure persists in the transport and communications component of the consumer price index (CPI) and housing inflation stays benign while food inflation remains modest at 5 percent pace.

Given that the government is expected to ease the pace of its spending going forward, BI may feel compelled to do more to support GDP growth momentum going into 2017. As CPI inflation is set to come in within the lower half of its target range, there is a greater likelihood now that BI may trim its policy rate by another 25 basis points before the year-end. The rate cut may be delivered when the central bank meets this week, DBS reported.

Meanwhile, the benchmark Jakarta Stock Exchange Composite (JKSE) traded 0.87 percent, or 46.514 points higher at 5,389.106 by 05:30 GMT.