Fixed Income Daily Update - October 20, 2026

China’s growth surprised on the upside at 4.5% YoY in 3Q26 (2Q26: 4.3%; consensus: 4.4%), with quarterly growth accelerating to 1.2% from 0.9%, reducing the urgency for broad-based stimulus. However, weak domestic demand and investment keep the recovery uneven, leaving room for targeted support in housing, infrastructure, and technology to sustain the 4.5–5% growth target.

Indonesia’s market selloff is spilling across equities, bonds, and FX, with JCI falling as much as 5.4% and the 10Y INDOGB yield reaching an intraday 7.47%, pointing to a rising domestic risk premium. Continued Rupiah weakness risks reinforcing a negative feedback loop through weaker foreign USD returns, further portfolio outflows, and higher funding costs, strengthening the case for renewed BI tightening.

BI’s USD240mn DNDF sale reinforces its defensive stance on Rupiah, with USD200mn (83.3%) allocated to the 3M tenor at IDR18,136/USD and USD40mn to 1M at IDR18,085/USD. The longer tenor helps extend hedging support into early 2027 and reduce spot dollar demand, although sustained FX stability still requires sufficient underlying USD supply.

INDOGB’s curve steepened further yesterday, with the 10Y yield rising 7bps to 7.43% while the 2Y yield declined 2bps to 6.90%, widening the 2Y–10Y spread to 53bps from 44bps. The 10Y INDOGB–UST spread widened 6.5bps to 235.1bps as Rupiah weakened 0.11% to IDR18,046/USD, reinforcing our cautious stance on long duration and keeping BI tightening risk elevated.