Full Report:
EN : bit.ly/FIMF20260714en
IN : bit.ly/FIMF20260714in
Market Brief
Indonesia’s local-currency government bond market moved sideways early this week, with yields shifting by 1–3 bps across the curve. The benchmark 10-year yield was unchanged at 7.24%. Secondary market activity eased, as outright transaction volume in government securities declined to IDR9.3 trillion from IDR14.9 trillion on Friday. Meanwhile, corporate bond trading volume totalled IDR8.1 trillion. On the currency front, the Rupiah depreciated to IDR18,109/USD from IDR18,065/USD previously. Indonesia’s USD-denominated sovereign bonds also traded weaker, with yields on INDO-31, INDO-34, and INDO-54 rising to 4.96% (+5 bps), 5.29% (+5 bps), and 5.86% (+5 bps), respectively.
U.S. Treasury yields moved higher, with the 2Y, 5Y, and 10Y yields closing at 4.27% (+6 bps), 4.38% (+7 bps), and 4.62% (+6 bps), respectively. European sovereign bond yields also rose, with 10-year yields closing at 3.11% (+5 bps) in Germany, 4.97% (+10 bps) in the UK, and 3.88% (+5 bps) in France. U.S. Treasury yields came under renewed upward pressure as escalating geopolitical tensions in the Middle East fuelled inflation concerns and reinforced expectations that the Federal Reserve may keep interest rates higher for longer. Market concerns intensified after Tehran declared that the Strait of Hormuz would be closed “until further notice,” while U.S. President Trump stated that the U.S. would reinstate its blockade of Iranian vessels and impose a 20% fee on all cargo transiting the strait. Oil prices surged after the U.S. and Iran exchanged fresh military strikes, with uncertainty surrounding the Strait of Hormuz further amplifying supply-risk concerns. Brent crude jumped by 9.8% to USD83.48/bbl, while WTI rose by 9.5% to USD78.20/bbl. Fiscal data also pointed to a weaker U.S. budget position. The U.S. Treasury reported a June budget deficit of USD120.3 billion, compared with a USD27.0 billion surplus in June 2025, as receipts totalled USD495.8 billion against outlays of USD616.1 billion. Meanwhile, Fed Governor Christopher Waller warned that inflation could remain elevated or even accelerate further, reinforcing the possibility that tighter monetary policy may be required if inflationary pressures persist. Investors now await a busy week of macroeconomic releases, including the June CPI and PPI reports, as well as Fed Chair Kevin Warsh’s first Congressional testimony, for further clues on the inflation outlook and the Fed’s policy path. Markets continue to price in at least one 25 bps Fed rate hike this year, with the probability of a September hike hovering around 51%.
Indonesia’s bond market is likely to trade with a weaker bias in the near term, as higher U.S. Treasury yields, rising oil prices, and renewed geopolitical tensions continue to weigh on global fixed-income sentiment. Domestically, attention will turn to today’s government sukuk auction, where investor demand will be closely watched as a gauge of market appetite amid the recent rise in yields and heightened external volatility.
Fixed Income News
• The Government of Indonesia is scheduled to conduct a sukuk auction today, with an indicative issuance target of IDR10.0 trillion.
• PEFINDO has affirmed its idAAA ratings for PT Pegadaian and its outstanding Shelf Registration Bonds, while also reaffirming the idAAA(sy) ratings for the company’s outstanding Shelf Registration Sukuk Mudharabah.
