Market Brief
Indonesia’s local currency government bond market closed firmer, with yields declining by 1–8 bps across the curve. The benchmark 10-year yield fell by 6 bps to 6.68%, reflecting renewed demand for duration despite continued currency pressure. The Rupiah weakened further to IDR17,744/USD from IDR17,717/USD in the previous session. Secondary market activity improved, with outright transaction volume in government securities rising to IDR16.7 trillion from IDR14.4 trillion, while corporate bond trading volume reached IDR6.7 trillion. Meanwhile, Indonesia’s USD-denominated sovereign bonds were relatively unchanged, with INDO-31, INDO-36, and INDO-54 closing at 4.76%, 5.46%, and 5.72%, respectively.
U.S. markets were closed for Memorial Day, leaving global investors to take directional cues from European sovereign bonds and energy-market developments. European government bonds rallied, with 10-year yields falling to 2.95% in Germany (-9 bps) and 3.56% in France (-10 bps), while the UK 10-year gilt yield was broadly unchanged at 4.90%. The rally was supported by easing inflation concerns after Brent crude slipped below USD100/bbl, following President Trump’s remarks that a memorandum of understanding with Iran had been “largely negotiated,” potentially paving the way for the reopening of the Strait of Hormuz. Lower oil prices helped unwind part of last week’s bond sell-off, which had been driven by concerns that prolonged energy disruptions could reignite inflationary pressures and force central banks to maintain a more hawkish policy stance. In Europe, softer activity indicators further reinforced duration demand. Eurozone PMI data pointed to the sharpest contraction since late 2023, reflecting pressure from elevated living costs and weakening demand, even as inflation risks remain present. In the UK, recent data showed April retail sales declining by 1.3%, while softer inflation, labor-market moderation, and the first private-sector contraction in a year helped temper expectations for aggressive Bank of England tightening. Overall, with U.S. markets closed, global bond sentiment was largely shaped by European developments, where lower oil prices and weaker macro data supported a rally in sovereign debt. Nevertheless, investors are likely to remain cautious, as inflation risks stemming from the Middle East conflict have not fully dissipated.
Indonesia’s bond market is likely to trade in a relatively quiet tone in the near term, as the absence of U.S. market direction and limited fresh external catalysts may keep investors in wait-and-see mode. Market participation may also remain thin ahead of the shortened trading week, keeping domestic bonds range-bound. Focus will likely turn to today’s government bond auction. A solid auction outcome, particularly if incoming bids remain robust and the government secures issuance in line with its indicative target, could help reinforce positive sentiment toward the domestic bond market.
Fixed Income News
• The Government of Indonesia is scheduled to conduct a bond auction today, with an indicative issuance target of IDR36.0 trillion.
• PEFINDO has reaffirmed the ratings for PT Hutama Karya (Persero) (HK) and its Shelf-Registered (SR) Bond II at idAA-.
