INDONESIA: Country Wrap: SWF Fund Agrees Ties with China
May-26 05:27
- China and Indonesia agreed to step up ties between their economies during Premier Li Qiang’s visit to Jakarta, including one on investment involving their sovereign wealth funds. Both their central banks signed a MOU on a framework for bilateral transactions in local currencies during a ceremony witnessed by Li and President Prabowo Subianto on Sunday. The two countries will boost cooperation on tourism and agricultural exports, while wealth funds China Investment Corporation and Danantara Indonesia entered an investment agreement. No details were provided. (source BBG)
- Indonesia will cut transport and power costs and deliver other stimulus in June and July in an effort to boost household spending and rekindle economic growth. The government will provide discounts on train, plane and ferry tickets during the school holiday period, as well as toll road fee reductions targeting about 110 million drivers, the Coordinating Economic Affairs Ministry said in a statement Saturday. It will also slash electricity bills by 50% for 79.3 million households and increase the allocation of staple food assistance for 18.3 million families. There will be salary top-ups for workers earning less than 3.5 million rupiah ($215) per month as well as for contract teachers. (source BBG)
- The Jakarta Composite fell today by -0.93% yet remains in a bullish period with only seven down days since the begging of April and strong foreign inflows.
- The rupiah has done very little today broadly unchanged at 16,213 yet remains over 1% better over the last week.
- Bonds have rallied in most maturities today with the 5YR and 10YR the best performers. INDOGB 10YR 6.80% (-2bps today)
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US TSYS: Extraordinary Measures And Cash Look Sufficient To Head Off X-Date
Apr-25 20:32
Treasury has about $164B in "extraordinary measures" available as of April 23 to avoid hitting the debt limit, per its regular report out Friday. That's out of a maximum total of $375B (they have used $211B).
- With Treasury cash looking healthy (around $600B), that's a fair amount of dry powder to get through the summer months to wait out the debt limit impasse. Tax receipts have looked strong with tariff revenues also starting to boost cash flows, further reducing the near-term urgency to adjust bond issuance.
- This has also helped push back analyst “x-date” expectations to later in the summer/September. We expect to hear from Treasury about its own x-date assumptions next week.
US TSYS: Treasury Market Trading Stayed Orderly In April: Fed Report
Apr-25 20:25
Liquidity across financial markets including the Treasury market deteriorated after President Trump's April 2 reciprocal tariffs announcement but market functioning was generally orderly, according to the Federal Reserve's semiannual report on financial stability, released Friday. (PDF link is here)
- Treasury market liquidity has been poor for years and yields were particularly volatile in early April, contributing to a deterioration in market liquidity, the Fed said.
- Nevertheless "trading remained orderly, and markets continued to function without serious disruption," according to the report, which looked at information available as of April 11.
FED: Ex-Gov Warsh: Fed Has Failed To Satisfy Price Stability Remit
Apr-25 20:22
From our Washington Policy Team - Some fairly sharp words today from ex-Fed Governor Warsh on the central bank (who for what it's worth is seen by betting markets as by far the frontrunner for the next Fed Chair):
- The best way for the Federal Reserve to safeguard its independence is for policymakers to avoid expanding the institution's role over time, including wading into policy areas that are outside its core mission, former Fed Governor Kevin Warsh, a leading contender to replace Jerome Powell as chair next year, said Friday.
- "I strongly believe in the operational independence of monetary policy as a wise political economy decision. And I believe that Fed independence is chiefly up to the Fed," Warsh said in a speech at a Group of Thirty event on the sidelines of the IMF meetings. "Institutional drift has coincided with the Fed’s failure to satisfy an essential part of its statutory remit, price stability. It has also contributed to an explosion of federal spending." His speech made no mention of Trump's tariffs or the appropriate monetary policy to deal with them.
- He said the ideas of data dependence and forward guidance widely adopted by Fed officials are not especially useful and might even be counterproductive.
"We should care little about two numbers to the right of the decimal point in the latest government release. Breathlessly awaiting trailing data from stale national accounts -- subject to significant, subsequent revision -- is evidence of false precision and analytic complacency," he said.
"Near-term forecasting is another distracting Fed preoccupation. Economists are not immune to the frailties of human nature. Once policymakers reveal their economic forecast, they can become prisoners of their own words. Fed leaders would be well-served to skip opportunities to share their latest musings."
