The government bond auction on 12-May recorded softer demand, with total incoming bids declining to Rp51.4tn, compared to Rp75tn in the previous auction and below both the YTD average of Rp69.7tn and our expectation range of Rp67tn 77tn. Nevertheless, demand remained above the government s initial issuance target of Rp36tn.

Demand composition remained concentrated in the belly segment, with the 4.9-yr FR109 attracting Rp14.98tn and the 10-yr FR108 receiving Rp7.48tn in bids. Combined, both series accounted for 43.7% of total incoming bids, lower than 58.7% in the previous auction. Meanwhile, demand for longer-tenor bonds (>14 years) remained relatively solid at Rp18.8tn, only slightly lower than Rp19.8tn previously, while SPN demand was stable at Rp10.1tn.

According to IDX s OTC trading report, Indonesian government bond trading activity strengthened on Tuesday (12-May), with total volume rising to Rp26.2tn (vs. Rp24.5tn on 11-May). Turnover came in below the prior week s daily average of Rp30.0tn, the 2026 YTD average of Rp 34.1tn, and the 2025 daily average of Rp32.0tn. The 5-yr FR0109 benchmark series (maturing on 15-Mar-31) led market activity, recording Rp5.3tn in trading volume. Its price rose to 96.67 (+0.18%), while the yield declined to 6.69% (-4.32 bps). This was followed the 10-yr FR0108 benchmark series (maturing on 15-Jul-28), recording Rp3.4tn in trading volume. Its price declined to 98.50 (-2.48%), while the yield rose to 6.71% (+34.67 bps). Close behind was the 19.3-yr FR0107 series (maturing on 15-Aug-45), with a total volume of Rp3.4tn. Its price slipped to 102.91 (-1.44%), while the yield inched up to 6.85% (+13.70 bps).

From a flow perspective, offshore participation weakened significantly in line with the rupiah depreciation as USD/IDR moved above Rp17,500/USD. Foreign incoming bids dropped to Rp5tn from Rp13.4tn previously and below the YTD average of Rp8.2tn, while awarded bids declined to Rp2.4tn.

On the supply side, the government issued Rp30.3tn, below both the initial target and the previous auction figures of Rp36tn and Rp40tn, respectively. Meanwhile, the weighted average cost of funds increased to 6.55% from 6.47%, with the average tenor extending to 14.8 years from 10.5 years previously. Year-to-date, the total gross issuance has reached Rp681.5tn, equivalent to 43.5% of the FY2026 issuance target.

Following the auction, INDOGB yields moved higher across the curve, although foreign inflows remained positive at around Rp0.7tn, extending the recent buying trend. The 5-yr FR109 yield rose to 6.65% (+13.4 bps), the 10-yr FR108 to 6.69% (+9.9 bps), the 15-yr FR106 to 6.82% (+7.8 bps), and the 20-yr FR107 to 6.81% (+9.1 bps). External indicators also weakened slightly, with Indonesia s 5-yr USD bond yield rising to 4.57% (+3.2 bps) and the 5-yr CDS widening to 84.41 bps (+1.35 bps). Meanwhile, the rupiah depreciated by -0.51% to Rp17,500/USD amid continued USD strength.

In the equity market, the JCI extended its decline, falling by -0.7% to 6,859 (-1.4% MTD; -20.7% YTD). Market sentiment remained pressured by escalating US-Iran geopolitical tensions, elevated oil prices, and the MSCI Indonesia rebalancing announcement, which triggered additional portfolio rotation pressure on large-cap stocks. Sectoral weakness was led by healthcare and industrial stocks amid concerns over imported inflation. Foreign investors recorded net equity outflows of -Rp932bn. Regionally, Asian equities closed mixed, with the Nikkei rising by +0.5%, while the Shanghai Composite slipped by -0.2%. Investor sentiment remained cautious after President Trump described the US-Iran ceasefire as on life support and rejected Iran s latest peace proposal, while ongoing restrictions in the Strait of Hormuz kept Brent crude elevated around USD 107/bbl.

Domestic Corp Bond Market

On the corporate side, trading activity increased on Tuesday (12-May), with total volume rising to Rp9.0tn (vs. Rp7.8tn on 11-May). Turnover came in below the prior week s daily average of Rp9.8tn, but above the 2026 YTD average of Rp7.5tn and the 2025 daily average of Rp4.0tn.

The SMSMII03ACN2 series (maturing on 7-Dec-26), rated idAAA(sy), was the most actively traded with a total volume of Rp328bn. Its price rose to 100.46 (+0.83%), while the yield declined to 6.59% (-147.00 bps). This was followed by the BOLD03B series (maturing on 10-Oct-28), rated idA+ with a volume of Rp290bn. Its price increased to 101.02 (+2.04%), while the yield declined to 6.03% (-93.16 bps). Close behind was the BAFI03BCN3 series (maturing on 28-May-28), rated idAAA with a volume of Rp240bn. Its price rose to 95.20 (+0.43%), while the yield declined to 8.78% (-23.16 bps).

Pefindo has assigned idBBB+ rating with negative outlook to PT Pelita Air Service. According to Pefindo, the negative outlook reflects heightened exposure to geopolitical-driven fuel price volatility, which may further pressure Pelita s already weak financial profile. The rating reflects Pelita s strong support and synergy with Pertamina Group as well as strong performance indicators. Meanwhile, the rating is constrained by weak financial profile, small fleet profile, and intense competition in a high-risk industry.

Pefindo has affirmed idAAA rating with stable outlook to PT Indosat Tbk (ISAT) and ISAT s outstanding bonds as well as its idAAA ratings for ISAT s outstanding sukuk. According to Pefindo, the rating reflects ISAT s strong support likelihood from its majority shareholders, very strong market position, and strong profit margin. Meanwhile, the rating is offset by its moderate capital structure and the intense competition within the telecommunications industry.

Pefindo has assigned idA rating with stable outlook to PT Bank Mega Syariah (Bank Mega Syariah). According to Pefindo, the rating reflects Bank Mega Syariah s strong likelihood of support from PT CT Corpora (the Group), moderate market position, and very strong capitalization profile. Meanwhile, the rating is constrained by pressure on asset quality and a concentrated financing portfolio.

Fitch Ratings has affirmed the Long-Term Issuer Default Rating (IDR) of PT Indofood CBP Sukses Makmur Tbk at BBB with a Negative Outlook, while also affirming the ratings on its US dollar senior unsecured notes at BBB . The rating remains aligned with the credit profile of its parent, PT Indofood Sukses Makmur Tbk, which owns 80.5% of ICBP. Fitch views the parent as having strong strategic and operational incentives to support ICBP due to its importance as the group s main earnings contributor and the high degree of operational integration across businesses. The Negative Outlook is driven primarily by Indonesia s sovereign outlook and the risk of a downgrade in the country ceiling, rather than any deterioration in ICBP s standalone fundamentals. Fitch expects margins to soften slightly in 2026 due to rising raw material costs and inflationary pressures linked to the Iran conflict, although strong brand loyalty and pricing power should help offset some cost pressures. Fitch also highlighted INDF s resilient cash flow generation, low leverage, vertically integrated operations, and dominant market position in Indonesia s instant noodle industry, where ICBP controls more than 70% market share. Despite elevated capex plans, Fitch expects INDF s net leverage to remain around or below 1x over the medium term.