Market Brief
Indonesia’s local-currency government bond market weakened yesterday, with yields rising by 5–15 bps across the curve. The benchmark 10-year yield increased by 7 bps to 7.18%. Secondary market activity improved significantly, as outright transaction volume in government securities rose to IDR39.1 trillion from IDR11.6 trillion in the previous session. Meanwhile, corporate bond trading volume stood at IDR6.7 trillion. On the currency front, the Rupiah depreciated to IDR17,859/USD from IDR17,843/USD previously. Indonesia’s USD-denominated sovereign bonds were broadly stable, with yields on INDO-31, INDO-34, and INDO-54 closing at 4.82% (unchanged), 5.15% (unchanged), and 5.68% (+1 bp), respectively.
U.S. Treasury yields edged lower but remained broadly range-bound, as investors awaited Thursday’s core PCE release for clearer guidance on the Fed’s policy outlook. The 2Y, 5Y, 10Y, and 30Y yields closed at 4.20% (-3 bps), 4.27% (-2 bps), 4.50% (-1 bp), and 4.95% (unchanged), respectively. European sovereign bonds also strengthened, with 10-year yields declining to 2.92% (-3 bps) in Germany, 4.75% (-6 bps) in the UK, and 3.68% (-3 bps) in France. Geopolitical developments remained a key focus for markets. Investors continued to assess signs of progress in U.S.–Iran negotiations, with both sides reportedly agreeing on a roadmap toward a peace deal within 60 days, while Washington granted Tehran a temporary license to resume oil sales. These developments helped keep energy prices under pressure, reducing some near-term inflation concerns. However, investors remained cautious in interpreting the latest headlines as a definitive resolution, particularly following recent episodes of conflicting signals surrounding the Strait of Hormuz and uncertainty over the durability of any ceasefire arrangement. On the data front, U.S. PMI readings were modestly supportive of the higher-for-longer narrative. The flash Manufacturing PMI rose to 55.7 in June from 55.1 in May, while the Services PMI improved to 51.3 from 50.7, indicating continued expansion across both sectors. Meanwhile, the Treasury’s USD69 billion 2-year note auction was met with solid demand, with the bid-to-cover ratio holding steady at 2.64x, in line with the previous auction. Looking ahead, market attention now turns squarely to Thursday’s PCE inflation report, which will be critical in shaping expectations for the Fed’s next policy move following last week’s hawkish FOMC meeting.
Indonesia’s bond market is likely to remain cautious in the near term, as elevated domestic yields, continued Rupiah weakness, and lingering uncertainty over the global rate outlook may keep investors defensive. Although U.S. Treasury yields were broadly range-bound overnight, sentiment is likely to remain fragile ahead of the upcoming U.S. core PCE release, which could further influence expectations for the Fed’s policy trajectory. Domestically, the government awarded IDR30.0 trillion in yesterday’s bond auction, below its IDR36.0 trillion indicative target. Incoming bids were broadly stable at IDR46.6 trillion versus IDR46.7 trillion in the previous auction, suggesting that demand remained selective amid persistent global uncertainties.
Fixed Income News
• The Government of Indonesia raised IDR30.0 trillion in Tuesday’s conventional bond auction, below the indicative target of IDR36.0 trillion,
• PT Indonesia Infrastructure Finance (IIF) intends to issue Shelf Registration Bond III Indonesia Infrastructure Finance Phase I 2026 with a target size of up to IDR500.0 billion.
