Halister News

(Bloomberg) -- Based on examples of other monetary policy frameworks, it is likely that the lending and deposit facilities are kept at 7-day repo +/- x bps spread, where x is decided by Bank Indonesia, analysts at BofAML write in note Wednesday.

• NOTE: BI said to adopt reverse repo as benchmark rate
• Three main developments to watch out for:
  • If the lending rate does come off substantially, this would be bullish for bonds
  • If the lending facility rate in the new framework does come off, it could put more pressure on local banks to ease rates
  • If overnight interbank market does jump from current levels of 4.8%/4.9% to 7-day repo levels of 5.5%, cost of funds for smaller banks, who are short of funds, will increase
  • To ensure that monetary policy transmission is better in the new framework, it is essential the overnight rate does not deviate too much from the 7-day repo rate
• 10-year govt bond yields down 4 bps to 7.456%