JGBS: Futures Lower, Bear Trend Intact, Ueda Expects Improvement In Real Wages

Indonesia’s consumer confidence was slightly lower in January at 127.2 after 127.7 but it printed above the Q4 average of 124.9 and remains at a solid level and in line with continued robust private consumption growth of around 5%, where it was in Q4, or even higher.

• Bank Indonesia unexpectedly cut rates 25bp to 5.75% in January and continues to support the economy with macroprudential policies. It is unlikely to cut again on February 19, especially given USDIDR is above 16300, but there is likely to be further easing to support growth before mid-year.
• The government is working to boost household spending by scaling back proposed VAT increases to only luxury goods, introducing a temporary 50% discount on electricity tariffs in January and February, free school meals and rice distribution. The budget deficit is likely to be narrower than in 2024 though.
• USDIDR is up 0.2% today to 16372 following US President Trump signing the order for tariffs on all US imports of steel and aluminium. The pair is up 0.3% since the January 15 BI decision but off the February 3 high of 16471. Also, the February average of the JP Morgan NEER is down 1.1% m/m with the index now 2.1% lower on a year ago. Thus, BI is likely to focus again on rupiah stability this month.

Indonesia consumer confidence vs real consumption y/y%

TYH5 is 109-06, -0-01 from NY closing levels. 

• Headlines have continued to rattle markets & squelch sentiment.
• Since the market close, headlines have stated that US President Donald Trump signed an order imposing 25% tariffs on steel and aluminium, with no exemptions. The tariffs also target finished metal products and take effect on March 4. Trump indicated tariffs on cars, drugs, and chips could follow, with further reciprocal tariffs expected within two days.
• That said, “US President Donald Trump has declared he would give "great consideration" to a tariff exemption for Australia.” (per ABC)
• There has been no cash trading for US tsys in Asia-Pac session today with Japan out for the Foundation Day Holiday.
• The focus turns to Fed Chairman Powell's testimony to the Senate Banking Committee today at 1000ET (text, Q&A). There is also a $58bn 3-year Treasury note sale.

Aggregate G10 FX moves have been modest so far in Tuesday trade. The USD BBDXY index sits around 1304, near end Monday levels from the US session. there was an early slight risk-off tone for markets, which benefited the yen, but follow through did not eventuate. 

• Early headwinds were dominated by Trump signing tariffs of 25% on steel and aluminium imports. Trump made other remarks in the oval office, stating Tariffs on autos and chips and other areas, including pharmaceuticals will be coming next Trump stated. Reciprocal tariff details will also be released in the next few day, Trump added.
• US equity futures are lower, although losses are not much beyond 0.20% at this stage. There has been no cash Tsy trading so far today, with Japan markets out. Futures in the Tsy space, are little changed.
• USD/JPY liquidity has no doubt been lighter, the pair last around 152.00 (range so far today 151.69-152.06).
• We had Australian consumer and business sentiment readings earlier from Westpac and NAB, but they didn't shift AUD, which was last 0.6270/75. NZD/USD was around 0.5640, also little changed for the session. The AUD/NZD cross is down slightly from recent highs, but still above 1.1100 (last 1.1115/20)
• USD/CAD is slightly higher, following the earlier tariff news, but at 1.4330/35, remains well within recent ranges.
• Looking ahead, the US January NFIB small business optimism prints and Fed Chair Powell testifies to the senate and Fed’s Hammack, Williams and Bowman speak. Q4 French unemployment is released and the ECB’s Schnabel appears, and BoE’s Mann & Bailey speak.