Government Bond Highlights
At the government bonds (Surat Utang Negara, “SUN”) auction dated 05/22/2018, the Indonesian government absorbed the fund of IDR15 trillion from the incoming bid of IDR31.47 trillion. The fund absorbed was higher than the indicative target of IDR10 trillion. FR0064 with 10-year tenor got the biggest bid of IDR14.2 trillion. Indonesia Composite Bond Index (ICBI) closed lower by 0.64% into 235.81 in last week.

The PCE deflator is the measurement highly scrutinized by the Fed. In March, the PCE deflator increase reached 2%, the Fed’s inflation target. Although the inflation reached the Fed’s target, the Fed’s officials were still debating whether the trend of 2% inflation will be maintainable further or only temporarily. The uncertainty is estimated to cause global markets to keep their eyes on the release of PCE deflator of April.

We estimate that Bank Indonesia’s massive monetary tightening under the administration its new Governor Perry Warjiyo will curb the significant trend of depreciated rupiah. Warjiyo focuses on the monetary policy emphasizing on the stable financial system.


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