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U.S. bond market firmed over the past week as softer-than-expected U.S. labor market indicators reinforced expectations of earlier Federal Reserve policy easing, outweighing pockets of resilient activity data. U.S. Treasury yields declined modestly across the curve, led by the front and belly, as markets continued to price roughly two 25 bp rate cuts in 2026, with the first potentially commencing in mid-year. In Europe, sovereign yields were largely range-bound following policy holds by the ECB and BoE, underscoring a broadly cautious but stable global rates backdrop ahead of a heavy slate of upcoming U.S. macro releases that will be pivotal in shaping near-term monetary policy expectations.

Indonesia’s local-currency government bond market underwent a healthy correction, with yields rising 1–14 bps across the curve following Moody’s revision of Indonesia’s sovereign outlook, while affirming the Baa2 rating. The 10-year benchmark yield rose to 6.44%, though upward pressure was partially cushioned by manageable inflation dynamics and continued domestic macro resilience. Importantly, foreign investor sentiment remained constructive, with net inflows of IDR10.3 trillion into government securities over the week, reversing the prior week’s outflows, despite a modest depreciation of the Rupiah.

Market liquidity improved marginally, reflected in slightly higher secondary-market trading volumes, while primary market demand softened but remained comfortably above issuance targets. Looking ahead, with a light domestic data calendar, Indonesia’s bond market direction is expected to remain highly sensitive to global developments, particularly U.S. labor and inflation data, alongside signals from upcoming government sukuk auction.

Best Regards,

Bahana Sekuritas Fixed Income Research