The April FOMC minutes signaled a hawkish shift, with a majority of Fed officials warning of potential rate hikes if inflation persists above 2%, pushing markets to price in up to 21bps of tightening by year-end. Bank Indonesia surprised markets with a larger-than-expected +50bps hike to 5.25%, framing it as a pro-stability measure to defend the Rupiah while keeping macroprudential policy loose to support credit growth. On the commodity front, President Prabowo established PT Danantara Sumberdaya Indonesia to monopolize strategic exports (coal, CPO, ferro-alloys) with full SOE takeover by September 2026, while also mandating 100% repatriation of natural resource export proceeds into the domestic financial system starting June 1 — aimed at bolstering FX reserves.
From the bond market, FR 56, 37, 90, and 59 are currently the cheapest based on our yield curve model. Last national business day, the dollar index was closed at 99.09 (-0.2%). Rupiah was appreciated by 0.3% at USDIDR at 17,654. The 10yr UST yield decreased by -8.1bps to 4.59% and 10yr INDOGBR increased by +4.3bps to 6.82% – the spread between the two was at 223bps.
Economy: Federal Reserve minutes revealed shifting bias toward interest rate hikes amid persistent inflation
The minutes of the April 28–29 FOMC meeting revealed that a majority of Federal Reserve officials warned of potential rate hikes if inflation runs persistently above their 2% target. Driven by inflationary pressures from the Middle East war and the blocked Strait of Hormuz, many policymakers called for removing the central bank’s easing bias. While the FOMC held the benchmark rate at 3.5% to 3.75%, three officials dissented against hinting at eventual cuts. Reflecting this hawkish shift, futures investors immediately priced in up to 21 bps of tightening by year-end. Source: Bloomberg
Economy: Bank Indonesia raised benchmark rate by 50 bps to 5.25% to safeguard Rupiah stability
Bank Indonesia (BI) raised its benchmark BI-Rate by 50 bps from 4.75% to 5.25% during its meeting on May 19–20, 2026. Concurrently, the Deposit Facility rose to 4.25% and the Lending Facility to 6.00%. BI Governor Perry Warjiyo emphasized that this aggressive tightening serves as a strategic pro-stability measure to reinforce the Rupiah against Middle East war volatility, while preemptively anchoring inflation within the 2.5±1% target. Meanwhile, BI maintained loose macroprudential policies to support real-sector credit growth. Source: Kontan
Economy: Government established new SOE and drafted regulation to monopolize strategic commodity exports
President Prabowo Subianto mandated all strategic natural resource exports to be channeled exclusively through a designated SOE to enhance trade governance and prevent revenue leakage. To enforce this, the government drafted an export regulation and established PT Danantara Sumberdaya Indonesia on May 19, 2026, under the Danantara sovereign wealth fund. Coordinating Minister Airlangga Hartarto noted the policy addresses persistent under-invoicing in sectors making up 60% of national exports. The mandate initially applies to coal, palm oil (CPO), and ferro-alloys, with a 3-month transition phase leading to a full SOE take-over of all contracts, shipping, and payments by September 1, 2026. Source: Kontan
Economy: Government mandated 100% natural resource export proceeds repatriation starting June 2026
The government issued Government Regulation No. 21/2026, mandating natural resource exporters to repatriate 100% of export proceeds into the domestic financial system starting June 1, 2026. Minister Airlangga Hartarto stated the policy requires a minimum 30% retention for 3 months in the oil and gas sector, and a 100% retention for 12 months for non-oil and gas. These funds must be deposited in state-owned commercial banks, backed by a 0% income tax rate on placement instruments, while the maximum mandatory rupiah conversion limit was cut to 50%. Finance Minister Purbaya Sadewa noted the framework will significantly bolster foreign exchange reserves. Source: Kontan
Fixed Income: BAF flagged upcoming bond maturity backed by ample bank facilities
PT Bussan Auto Finance (BAF)’s idAAA-rated SR Bond III Phase III Year 2025 Series A, totaling IDR240bn, was scheduled to mature on 8 Jun’26. The company planned to retire the obligation entirely through external funding, supported by undisbursed bank facilities of IDR15.9n as of 8 May’26, providing a substantial liquidity buffer relative to the maturing instrument. Source: Pefindo
Fixed Income: Mandiri Tunas Finance fully settled IDR485.7bn bond, rating withdrawn
PT Mandiri Tunas Finance (MTF) completed the full repayment of its idAAA-rated SR Bond V Mandiri Tunas Finance Phase II Year 2021 Series B, amounting to IDR485.7bn, on 20 May’26. Following the settlement, Pefindo subsequently withdrew the rating on the instrument. Source: Pefindo
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