Sukuk auction recap (10-Mar): softening bids. As expected, total incoming bids in the last sukuk auction for 1Q-2026 softened further, reaching Rp31tn (vs. Rp35.6tn of bids on 24-Feb and YTD average of Rp40.9tn), broadly in line with our forecast (range: Rp26tn-31tn). Looking at demand per series, interestingly, the longest tenor, i.e., 23.8-yr PBS038, was the most attractive series during the auction, reaching bids of Rp9.3tn (vs. Rp9tn prior; or YTD avg.: Rp6.9tn). Close behind it was the 9-mo SPNS, with bids of Rp8.2tn (vs. Rp6.4tn prior or YTD avg.: Rp7.6tn). Notably, the share of short-tenor SPNS bids rebounded, improving to 37.4% (vs. 26.1% previously; 35.7% YTD average), of which the yields were likely attractive relative to other market instruments.
Sukuk auction result (10-Mar): issuing more than targets, with shortening tenors. Despite softer demand, the government issued Rp15tn, well above its Rp11tn initial target but below the Rp20tn issued previously. SPNS issuance rose further to Rp10.6tn (vs. Rp9tn prior), absorbing 91.5% of SPNS bids and accounting for 70.7% of total issuance. The average tenor shortened to 4.9 years (vs. 7.9 years prior), while the weighted average cost of funds was stable at 5.51%.
Thus, including the global bond issuance and the latest conventional bond auction, year-to-date, the issuance has reached Rp491.1tn, or 31.3% of the FY2026 target. We view positively the DMO s above-target issuance, as it supports a front-loading strategy, reduces near-term supply risk, and helps maintain yield stability amid ongoing market volatility. The government is also preparing additional global bond issuance, including dim sum and euro-denominated bonds, which could further diversify funding sources.
Until 1Q-2026, onshore banks have maintained their position as the largest type of sukuk buyer in both primary and secondary markets. Based on bond fund flow estimates, in 1Q-2026, onshore banks maintained their position as the largest type of sukuk buyer, accounting for approximately Rp31.4tn or 44.2% of the total awarded, underscoring their continued role as the main absorption channel. They were followed by Bank Indonesia and other investors, which recorded net awarded amounts of Rp19.2tn and Rp11.5tn, respectively.
Not only in the primary market, but onshore banks domination also extended to the secondary market. Based on DMO data (settlement date of 1-Apr), onshore banks recorded the largest sukuk net purchases of Rp23.2tn, followed by Bank Indonesia (+Rp17.5tn) and other investors (+Rp12.7tn). Insurance and pension funds and mutual funds also posted net buying of +Rp3.5tn and +Rp2.7tn, respectively.
Auction outlook: rebounding demand. We expect demand at today s sukuk auction to remain above the government s initial target and higher than the last sukuk auction s figure, mirroring rebounding demand in the latest conventional bond auction. The total incoming bids are estimated at Rp33tn or in a range of Rp28tn-38tn (vs. Rp35.6tn bids in the prior sukuk auction on 10-Mar). The proposed shift to holding SRBI auctions twice a week could partially redirect demand from SPNS, especially at the short-end of the curve. Nevertheless, Bank Indonesia s participation through non-competitive bids is expected to sustain the overall auction demand. In terms of liquidity, the environment continues to be favorable. The system liquidity projection by Bank Indonesia stands at Rp88.1tn (vs. Rp12.8tn in the prior auction). Note that there is Rp4.9tn of maturing bonds this week, plus there are still coupon payments totaling Rp1.5tn.
We forecast the fair yields for the bond series to be auctioned today as follows: 4.95% (range: 4.90-5.00%) for 1-mo SPNS, 5.30% (range: 5.25-5.35%) for 6-mo SPNS, 5.35% (range: 5.30-5.40%) for 9-mo SPNS, 6.10% (range: 6.05-6.15%) for 2.3-yr PBS030, 6.20% (range: 6.15-6.25%) for 4.6-yr PBS040, 6.55% (range: 6.50-6.60%) for 13.2-yr PBS034, 6.60% (range: 6.55-6.65%) for 17-yr PBS005, and 6.75% (range: 6.70-6.80%) for 23.7-yr PBS038.
