Bond Investment Opportunities Amid Ongoing Trade War

TEMPO.CO, Jakarta - Portfolio Manager at PT Manulife Aset Manajemen Indonesia, Laras Febriany, highlighted opportunities for bond investments amid the continuing trade war. She pointed to short-tenor bonds with low duration as an attractive option, particularly after Bank Indonesia (BI) cut its benchmark interest rate and as markets expect the US Federal Reserve to lower the Fed Funds Rate.

After Bank Indonesia cut its benchmark rate to 5.50%, bond yields have been on a downward trend as well, making short-term bonds an attractive opportunity for capital gains.

"Bond coupons can also serve as a cushion amid persistent uncertainties and expected short-term volatilities," she said in a written statement on Monday, June 16.

One factor supporting the domestic bond market is the weakening US dollar, which opens up opportunities for the government to maintain rupiah stability. According to Laras, pressure on the rupiah has also eased following the seasonal period of dividend payments and US dollar demand related to the Hajj. She projected the rupiah to trade between Rp16,200 to Rp16,900 until the end of the year.

Bank Indonesia has also signaled room for more rate cuts amid controlled inflation and the urgency to support economic growth. Manulife Aset Manajemen Indonesia predicts that the BI rate could fall to 5.25 percent by the end of 2025.

That said, Laras noted several risks that warrant close attention. One is the persistent volatility in US Treasury yields, driven by the downgrade of the US credit rating and the ongoing trade war between the US and China.

On the domestic front, risks may arise if the government’s stimulus fails to reach intended targets. In that case, consumer purchasing power may not fully recover, which would affect economic growth.

Laras also highlighted a number of potential catalysts expected to support the market. Chief among them is the continued resilience of rupiah-denominated bonds, along with plans to increase global bond issuance. "Both in US dollars and in other foreign currencies such as the Australian dollar (AUD) and Chinese renminbi (RMB)," she said. The expectation of lower Bank Indonesia Rupiah Securities (SRBI) issuance and a high volume of maturing SRBI in the market are also predicted to increase bond market liquidity.

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