Government bond auction demand weakened on 9-Jun, with total incoming bids declining to Rp46.7tn from Rp57.3tn in the previous auction, well below the YTD average of Rp66.5tn. Although demand remained above the government’s issuance target of Rp36tn, this was the lowest auction demand recorded so far this year. Investors continued to favor the belly segment, with the 4.9-yr FR109 attracting Rp15.3tn of bids and the 10-yr FR108 receiving Rp8.4tn. Together, the two benchmark series accounted for 50.8% of total bids, slightly higher than 50.1% in the previous auction. The decline in demand was mainly driven by longer-tenor bonds (>14 years), whose bids fell sharply to Rp12.4tn from Rp20.9tn previously, likely reflecting a more cautious stance after recent signals from Bank Indonesia and the government regarding efforts to raise yield attractiveness to support the rupiah. Meanwhile, demand for short-term SPNs rebounded to Rp10.5tn from Rp7.7tn.
Participation declined across both domestic and foreign investors. Onshore bids fell 12.2% auction-to-auction to Rp39.7tn, while offshore bids dropped more sharply by 33.0% to Rp4.8tn, remaining below the YTD average of Rp7.8tn. As a result, foreign participation declined to 10.3% of total bids from 12.5% previously and below the YTD average of 11.5%. Foreign awarded bids also fell significantly to Rp2.2tn from Rp4.9tn in the previous auction, indicating weaker offshore appetite amid ongoing market uncertainty.
On the supply side, the government issued only Rp26.4tn, below both its initial target and the Rp36.9tn awarded in the previous auction. This marked the smallest bond issuance so far this year. The weighted average cost of funds increased further to 7.31% from 6.73%, although the average tenor shortened to 10.7 years from 11.8 years previously. Despite the lower issuance, we continue to view sovereign supply risk as manageable, given the government’s front-loaded funding strategy. Year-to-date, the average issuance per biweekly auction has reached Rp49.8tn, above the initial target of Rp46tn, while the cumulative gross issuance has reached Rp849.2tn, equivalent to 54.2% of the FY2026 financing target. Assuming the fiscal deficit remains at 2.68% of GDP, we estimate the average auction target in 2H26 could decline to around Rp38.8tn. Funding needs could fall even further if the government reduces its ambitious below-the-line financing target of Rp203tn (vs. Rp86.3tn realized in 2025), increases the use of excess budget balance (SAL) beyond the budgeted Rp60.4tn (vs. Rp85.6tn utilized in 2025), or raises loan financing utilization above the current Rp32.7tn target (vs. Rp97tn realized in 2025).
Following the bond auction, INDOGB yields moved modestly higher across the curve amid reported foreign outflows of Rp1.6tn. The 5-yr FR109 yield rose 2.2 bps to 7.32%, while the 10-yr FR108 increased by 12.1 bps to 7.37%. Selling pressure was more pronounced in longer tenors, with the 15-yr FR106 and 20-yr FR107 yields rising by 18 bps and 22.1 bps, respectively. External indicators improved modestly, with Indonesia’s 5-yr USD sovereign yield declining by 5.2 bps to 4.97% and the 5-yr CDS tightening by 4.4 bps to 97.0 bps. Meanwhile, the rupiah rebounded by 0.65% to Rp18,060/USD, although it still weakened by 1.0% MTD and 8.2% YTD.
According to IDX s OTC trading report, Indonesian government bond trading activity strengthened on Tuesday (9-June), with total volume rising to Rp40.8tn (vs. Rp22.1tn on 8-June). Turnover came in above the prior week s daily average of Rp28.8tn, the 2026 YTD average of Rp 31.9tn, and the 2025 daily average of Rp32.0tn. The 9.1-yr FR0103 series (maturing on 15-Jul-35) led market activity, recording Rp12.6tn in trading volume. Its price declined to 96.15 (-0.47%), while the yield rose to 7.34% (+7.03 bps). This was followed the 10-yr FR0108 benchmark series (maturing on 15-Apr-36), recording Rp6.2tn in trading volume. Its price eased to 94.60 (-0.68%), while the yield increased to 7.28% (+9.66 bps). Close behind was the 5-yr FR0109 benchmark series (maturing on 15-Mar-31), with a total volume of Rp4.6tn. Its price rose to 94.30 (+0.11%), while the yield declined to 7.31% (-2.54 bps).
The JCI rallied by 7.6% to 5,747, outperforming regional markets as easing Middle East tensions improved global risk sentiment and reduced pressure on the rupiah. The rally was led by basic materials and infrastructure stocks, while energy shares also gained on expectations of a more flexible coal RKAB policy in 2026. Foreign investors, however, remained net sellers with Rp2.4tn of equity outflows, bringing MTD and YTD outflows to Rp10.3tn and Rp64.3tn, respectively.
Separately, Bank Indonesia (BI) unexpectedly raised the policy rate further by 25 bps to 5.50% in an off-cycle meeting, following the surprise 50 bps hike in May. The Deposit Facility and Lending Facility rates were also increased by 25 bps to 4.50% and 6.25%, respectively. BI cited continued rupiah depreciation and elevated external risks as the primary reasons behind the move, reinforcing its commitment to safeguarding FX stability ahead of next week’s potentially hawkish FOMC meeting. The decision is consistent with the joint policy message delivered by BI and the Ministry of Finance over the weekend, which emphasized rupiah stability and efforts to attract portfolio inflows.
Beyond the rate hike, BI announced a 10% reduction in hedging swap costs for foreign investors, reopened 3-, 6-, 9-, and 12-month repo auctions, restored biweekly SRBI auctions, and continued intensive intervention in the spot, DNDF, and offshore NDF markets. Since the May meeting, average SRBI yields have increased by around 82 bps, or by approximately 230 bps year-to-date, highlighting BI’s determination to enhance the attractiveness of rupiah assets. While these measures should support the rupiah and attract short-term inflows, investor feedback suggests that higher yields alone are unlikely to trigger a meaningful return of foreign capital. Investors continue to place greater emphasis on currency stability, fiscal credibility, policy predictability, and rating risks. In our view, the latest off-cycle hike reinforces BI’s pro-stability stance and should help stabilize market sentiment in the near term. However, a sustained recovery in foreign participation will ultimately depend on stronger policy consistency, clearer communication, and improved confidence in Indonesia’s medium-term outlook.
Domestic Corp Bond Market
On the corporate side, trading activity moderated on Tuesday (9-June), with total volume declining to Rp10.5tn (vs. Rp14.2tn on 8-June). Turnover came in below the prior week s daily average of Rp12.4tn, but above the 2026 YTD average of Rp7.9tn and the 2025 daily average of Rp4.0tn.
The SIBALI01ACN3 series (maturing on 15-Dec-26), rated idA(sy), was the most actively traded with a total volume of Rp378bn. Its price declined to 96.83 (-0.003%), while the yield rose to 12.94% (+4.08 bps). This was followed by the SMMBMA01ACN2 series (maturing on 27-Aug-26), rated idA(sy) with a volume of Rp324bn. Its price increased to 100.42 (+1.52%), while the yield declined to 5.52% (-703.66 bps). Close behind was the MBMA01BCN3 series (maturing on 9-Dec-30), rated idA with a volume of Rp315bn. Its price rose to 95.71 (+1.84%), while the yield declined to 9.43% (-49.31 bps).
Pefindo has assigned idA rating with stable outlook to PT Steel Pipe Industry of Indonesia Tbk (ISSP) s proposed Bond III Year 2026 and its idA(sy) rating to its proposed Sukuk Ijarah III Year 2026 with a maximum aggregate issuance amount of IDR1 trillion. At the same time, PEFINDO has affirmed its idA ratings to ISSP and its outstanding bonds, as well as its idA(sy) ratings to ISSP s outstanding sukuk. PEFINDO also has affirmed its idAAA rating to the Company s Sustainable Link Bond I Year 2024, which is fully guaranteed by Credit Guarantee and Investment Facility (CGIF, idAAA/Stable). According to Pefindo, the rating reflects ISSP s strong market position, well-diversified business, as well as good profit margins and strong cash flow protection measures. Meanwhile, the rating is constrained by its moderate capital structure, high working capital needs, as well as its exposure to the volatility of steel prices and foreign exchange fluctuation.
Pefindo has has lowered the corporate rating of Perusahaan Umum Perumahan Nasional (Perumnas) to idCCC with CreditWatch with Negative Implication from idB/Negative. At the same time, we also lowered the ratings of Perumnas’ Medium-Term Notes (MTN) I, MTN III, MTN IV, MTN V, MTN VI, MTN VIII, and Long-Term Notes (LTN) to idCCC. These rating actions follow Perumnas deferring to repay the coupon payment of LTN amounting to IDR19.5 billion due on May 29, 2026, in which Perumnas plans to obtain standstill approval by 15 working days after the due date at the latest, according to the applicable remedial period. At the same time, Perumnas has not yet finalized the ongoing new grand restructuring plans, including with its creditors. In Pefindo view, Perumnas faces heightened refinancing risk to fully repay the maturing debt obligations in a timely manner amid its weaker financial profile and higher liquidity pressure. According to Pefindo, the rating reflects Perumnas’ geographically well-diversified projects. The rating is constrained by its very aggressive capital structure and very weak liquidity, a low portion of recurring income, and the vulnerability of the property business to changes in macroeconomic conditions.
Pefindo has has affirmed its idAAA(sf)(sy) rating to the Class A KIK EBA Syariah BRI-MI Jakarta Lingkar Baratsatu (KIK EBA Syariah JLB). The underlying asset for the transaction is the future cash flow from the Jakarta Outer Ring Road (JORR) toll road revenue of up to IDR2.6 trillion for a maximum of 7 years. According to Pefindo, the rating reflects the very strong profile of the JORR toll road, the very strong profile of PT Jakarta Lingkar Baratsatu (JLB) as the originator and collection agent, and strong future cash flow projections. The rating is constrained by by the high concentration on a single toll road.
