Market Brief
Indonesia’s local-currency bond market traded broadly sideways on Tuesday, with most government bond yields holding near the previous day’s closing levels and the 10-year benchmark remaining steady at 6.21%. The rupiah strengthened modestly to IDR16,676/USD from IDR16,695/USD. Secondary-market liquidity improved notably: outright government securities turnover rose to IDR28.0 trillion from IDR15.3 trillion on Monday, while corporate bond trading volume increased to IDR6.8 trillion. Meanwhile, Indonesia’s USD-denominated sovereign curve shifted higher, with yields on the Indo-30, Indo-35, and Indo-54 closing at 4.33% (+4 bps), 4.90% (+1 bps), and 5.33% (+2 bps), respectively.
U.S. Treasuries weakened last night as stronger-than-expected labor-market indicators tempered expectations for near-term monetary easing. October JOLTS data showed job openings rising to 7.67 million—the highest in five months and well above consensus—underscoring persistent labor-demand resilience despite the Federal Reserve’s two rate cuts earlier this year aimed at supporting softer employment conditions. The job data release pushed the 10-year yield back toward Monday’s intraday high, its strongest level since late September, as markets reassessed the urgency and magnitude of further Fed accommodation. While traders still assign a high probability to a 25-bps cut at Wednesday’s FOMC meeting—bringing the fed funds target range to 3.50%–3.75%—confidence in additional easing has moderated in recent weeks. Auction dynamics provided some stability: the Treasury’s USD39 billion 10-year issuance cleared in line with when-issued levels at 4.175%, and the bid-to-cover ratio of 2.55x exceeded both the prior auction and the six-auction average of 2.43x and 2.51x, respectively, indicating solid end-investor demand. Policymakers, however, continue to operate with an incomplete macro dataset, as the six-week federal government shutdown delayed October and November employment releases until mid-December, increasing uncertainty around underlying labor-market momentum. Market focus will center on Chair Powell’s communication. A messaging stance emphasizing patience and data-dependence would likely keep yields contained within their recent range and support near-term USD stability. Conversely, a more dovish signal that preserves the option of a January rate cut could weaken the USD and open a room for declining bond yields. U.S. Treasury yields ended the session higher, with the 2-year, 5-year, 10-year, and 30-year closing at 3.61% (+3 bps), 3.78% (+3 bps), 4.18% (+1 bps), and 4.81% (+1 bps), respectively. In contrast, European government bond yields declined, with 10-year rates in Germany, the UK, and France closing at 2.85% (-1 bps), 4.50% (-3 bps), and 3.55% (-3 bps).
In the near term, Indonesian government bond yields are likely to maintain a sideways trajectory as investors adopt a cautious stance ahead of the midweek FOMC decision, especially in light of the stronger-than-expected U.S. job-openings data. The more defensive positioning was also reflected in yesterday’s government sukuk auction, where total incoming bids reached only IDR18.9 trillion—a marked pullback from IDR34.5 trillion in the prior auction and below the year-to-date average of IDR36.3 trillion across the first 22 sukuk auctions of 2025.
Fixed Income News
• The Government of Indonesia successfully raised IDR8.0 trillion in its latest sukuk auction, modestly exceeding the indicative target of IDR7.0 trillion.
• PEFINDO affirmed its idA+ ratings on PT Bumi Resources Tbk (BUMI) and its outstanding Shelf Registered Bond I.
Best Regards,
Bahana Sekuritas Fixed Income Research
