Government bond auction demand rebounded as expected, with total bids rising to Rp55.1tn from Rp46.6tn in the previous auction, although still below the YTD average of Rp64.1tn. Demand remained well above the government’s Rp34tn issuance target and continued to concentrate in the benchmark tenors, with FR109 (4.9-year) attracting Rp19.4tn and FR108 (10-year) receiving Rp13.7tn, together accounting for 60.1% of the total bids. SPN demand also improved to Rp7.8tn from Rp7.3tn previously.
Foreign participation recovered meaningfully, with incoming offshore bids rising to Rp8.5tn, up by 30.4% from the previous auction and above the YTD average of Rp7.7tn. Awarded foreign bids also increased to Rp6.0tn from Rp4.5tn, exceeding the YTD average of Rp4.4tn. The stronger foreign demand was likely supported by lower oil prices and softer-than-expected US labor data, which reduced expectations for further Fed tightening and improved sentiment toward emerging market bonds.
The government issued Rp32tn, higher than Rp30tn in the previous auction and close to its issuance target. The weighted average cost of funds declined further to 7.16% from 7.23%, although the average tenor shortened to 10.8 years from 11.6 years. Year-to-date, the gross bond issuance has reached Rp930.7tn, equivalent to 59.4% of the full-year issuance target.
Despite strong estimated foreign inflows of around Rp5.6tn, the secondary bond market weakened slightly following the auction. The 5-yr FR109 yield rose by 3.8 bps to 7.09%, while the 10-yr FR108 yield increased by 5.1 bps to 7.16%. The 15-yr and 20-yr yields also rose modestly to 7.21% and 7.20%, respectively. Indonesia’s 5-yr USD sovereign yield edged up by 1.2 bps to 4.89%, while the 5-yr CDS narrowed slightly to 89.6 bps. Meanwhile, the rupiah appreciated by 0.07% to Rp17,982/USD.
According to IDX s OTC trading report, Indonesian government bond trading activity moderated on Tuesday (7-July), with total volume declining to Rp22.3tn (vs. Rp22.8tn on 6-July). Turnover came in below the prior week s daily average of Rp24.3tn, the 2026 YTD average of Rp 30.8tn, and the 2025 daily average of Rp32.0tn. The 2.0-yr PBS030 series (maturing on 15-Jul-28) led market activity, recording Rp4.3tn in trading volume. Its price fell to 97.95 (-1.01%), while the yield rose to 6.98% (+54.32 bps). This was followed the 5-yr FR0109 benchmark series (maturing on 15-Mar-31), recording Rp4.2tn in trading volume. Its price fell to 95.10 (-0.05%), while the yield rose to 7.12% (+1.38 bps). Close behind was the 0.02-yr PBS032 series (maturing on 15-Jul-26), with a total volume of Rp1.7tn. Its price rose to 99.96 (+0.03%), while the yield declined to 6.53% (-98.08 bps).
The latest ownership data (settlement as of 3-Jul) showed that foreign ownership increased to Rp888.9tn, or 12.79% of the outstanding government bonds, with cumulative net inflows reaching Rp10.2tn YTD, confirming the continued return of foreign demand. Insurance companies and pension funds remained the largest domestic buyers (Rp136.3tn), followed by Bank Indonesia (+Rp83.7tn), other domestic investors (+Rp81.1tn), banks (+Rp34tn), retail investors (+Rp22.1tn), and mutual funds (+Rp12.8tn).
Meanwhile, the JCI extended its gains, rising by 1.2% to 5,986, supported by domestic buying despite continued foreign selling. Foreign investors recorded net equity outflows of Rp176.8bn (net outflows of Rp1.2tn MTD and Rp74.8tn YTD), while regional equity markets closed mostly lower with the Nikkei down by 2.1% to 68,257 (-2.6% MTD, +35.6% YTD) and the Shanghai down by 1.3% to 3,990 (-2.5% MTD, +0.5% YTD) as investors stayed cautious ahead of the release of the FOMC minutes later this week.
On the domestic front, 1) Indonesia’s FX reserves increased to USD 145.6bn at the end of June from USD 144.9bn in May, ending five consecutive months of declines; The increase was mainly supported by tax and services receipts amid government external debt repayments. 2) Indonesia’s fiscal deficit widened modestly to Rp196.5tn (0.76% of GDP) in 1H26 from Rp180.4tn (0.70%) in 5M26, but it remained lower than 0.84% of GDP in 1H25. This implies a monthly deficit of Rp16.2tn in June, broadly stable from Rp16.0tn in May and well below our projection of Rp81.2tn. The relatively contained fiscal deficit was supported by strong revenue performance, with state revenues reaching Rp1,459.4tn (+21.4% YoY), equivalent to 46.3% of the full-year target, compared with 40.0% achieved in the same period last year. The improvement was driven by stronger economic activity, enhanced tax and customs administration, and higher non-tax revenues from ministries/agencies and public service agencies (BLUs). Meanwhile, government spending reached Rp1,656tn (+17.8% YoY), or 43.1% of the annual budget, also higher than 38.8% in 1H25. The total financing realization reached Rp452tn, lifting the excess financing to Rp255.4tn, compared with Rp134.1tn in 5M26 and Rp86.5tn in 1H25. Based on historical revenue and expenditure seasonality over the past five years, we maintain our forecast that Indonesia’s fiscal deficit will reach around 2.7% of GDP in 2026, comfortably below the 3% fiscal rule, supporting a constructive outlook for the government bond market. Meanwhile, Finance Minister Purbaya Yudhi Sadewa projects Indonesia’s 2026 fiscal deficit to widen to IDR734.3tn (2.85% of GDP), higher than the 2026 State Budget target of IDR689.1tn (2.68% of GDP).
The wider deficit mainly reflects higher projected government spending, which is expected to exceed the approved budget ceiling. Total government expenditure is now forecast at IDR3,942.4tn (102.6% of the APBN target), while state revenue is projected to reach IDR3,208.1tn (101.7% of the APBN target).
Domestic Corp Bond Market
On the corporate side, trading activity increased on Tuesday (7-July), with total volume rising to Rp12.2tn (vs. Rp10.8tn on 6-July). Turnover came in above the prior week s daily average of Rp12.1tn, the 2026 YTD average of Rp8.5tn, and the 2025 daily average of Rp4.0tn.
The SIBALI01BCN3 series (maturing on 05-Dec-28), rated idA(sy), was the most actively traded with a total volume of Rp665bn. Its price fell to 98.26 (-1.98%), while the yield rose to 8.05% (+91.00 bps). This was followed by the SMLPPI01CN1 series (maturing on 04-Oct-29), rated idA(sy) with a volume of Rp529bn. Its price fell to 108.77 (-2.15%), while the yield rose to 7.91% (+78.90 bps). Close behind was the WISL03B series (maturing on 05-Jul-27), rated idA with a volume of Rp477bn. Its price fell to 101.48 (-0.09%), while the yield rose to 7.19% (+8.90 bps).
Fitch affirmed PT Reasuransi MAIPARK Indonesia s National IFS Rating at A+(idn) with a Stable Outlook, reflecting its strong earnings, solid capitalisation, and robust retrocession protection against earthquake risks. MAIPARK continues to maintain a very strong capital position, with an RBC ratio of 1,101%, while profitability improved in 2025 through stronger underwriting performance. Fitch also highlighted the company s prudent catastrophe risk management and adequate liquidity, although its specialised earthquake reinsurance business and limited operating scale continue to constrain the rating.
