The government is scheduled to hold its next IDR sukuk auction on 14-Jul, with an issuance target of Rp10tn, unchanged from the previous sukuk auction. The auction will offer SPNS series (1-month, 6-month, and 9-month tenors) and PBS030 series (2-year tenor), PBS040 (4.3-year), PBSG002 (7.3-year), PBS034 (12.9-year), and PBS038 (23.4-year). Following the strong demand at last week’s conventional bond auction, we expect investor appetite to rebound, with total incoming bids of around Rp30tn (range: Rp25tn 35tn), supported by attractive yield levels, ample reinvestment liquidity from Rp115tn of bond maturities in July (including Rp90.3tn from PBS032 maturing on 15-Jul), and continued demand from domestic institutional investors. In addition, S&P’s affirmation of Indonesia’s BBB/A-2 sovereign rating with a Stable Outlook should provide a modest boost to investor sentiment ahead of the auction.
Sukuk Auction Result Recap (30-Jun): Incoming Bids Fell to the Lowest Level This Year. The first sukuk auction of 3Q26 recorded the lowest investor demand so far this year, with the total incoming bids declining to Rp15.9tn, down from Rp19.1tn at the previous sukuk auction and well below the YTD average of Rp30.3tn per auction. Demand weakened across both SPNS and PBS securities. SPNS bids fell to Rp7.0tn (from Rp10.0tn previously), while PBS bids eased to Rp8.9tn (from Rp9.2tn). The 2-yr PBS030 attracted the largest demand of Rp4.4tn (27.9% of total bids), followed closely by the 9-mo SPNS at Rp4.4tn (27.6%).
Despite the weaker demand, the government awarded the full Rp10tn, in line with its issuance target and slightly above the Rp9.5tn awarded at the previous auction. Issuance shifted toward the front end of the curve, with the weighted average tenor declining to 2.6 years from 5.4 years previously, while the weighted average cost of funds increased slightly to 7.14% from 7.04%. Year-to-date, the total government bond issuance has reached Rp930.7tn, equivalent to 59.4% of the FY2026 gross issuance target, based on the government’s fiscal deficit assumption of 2.68% of GDP.
Bank Indonesia Was the Largest Buyer in the Latest Sukuk Auction, While Onshore Banks Continued to Lead YTD. Based on our estimates, Bank Indonesia emerged as the largest buyer at the 30-Jun sukuk auction, with net purchases of Rp4.0tn, equivalent to 40% of the total issuance (vs. Rp0.5tn in the previous auction on 17-Jun and a YTD average of Rp3.3tn per auction). Onshore banks and foreign investors followed, with net purchases of Rp1.6tn and Rp1.4tn, respectively. Despite BI’s strong participation in the latest auction, onshore banks have remained the largest net buyers on a year-to-date basis, accumulating Rp66.8tn (43.6% of total net issuance), followed by Bank Indonesia (Rp39.0tn), other domestic investors (Rp21.1tn), and insurance companies and pension funds (Rp16.0tn).
Including secondary market transactions, onshore banks also remained the largest net buyers of sukuk, with cumulative net purchases of Rp43.9tn, followed by Bank Indonesia (+Rp37.8tn), other domestic investors (+Rp23.3tn), insurance companies and pension funds (+Rp14.6tn), mutual funds (+Rp4.2tn), retail investors (+Rp2.6tn), and foreign investors (+Rp1.9tn), based on the latest DMO bond flow data (settlement as of 8-Jul-2026).
Auction Outlook: Demand Likely to Rebound. We expect demand at today’s sukuk auction to rebound and remain comfortably above the government’s Rp10tn issuance target, following the recovery in investor appetite at last week’s conventional bond auction. We forecast total incoming bids of around Rp30tn (range: Rp25tn 35tn), compared with Rp15.9tn at the previous sukuk auction on 30-Jun.
Several factors should support demand. First, Bank Indonesia’s liquidity conditions remain relatively ample. Second, sizeable reinvestment flows are expected, with Rp115tn of government bonds maturing in July including Rp90.3tn from PBS032 on 15-Jul along with Rp6.1tn of coupon payments this week. Third, S&P’s affirmation of Indonesia’s BBB/A-2 sovereign rating with a Stable Outlook should provide an additional boost to investor confidence. S&P views the recent fiscal pressures as temporary and continues to highlight Indonesia’s strong growth prospects, prudent fiscal framework, and relatively low government debt as key credit strengths.
Overall, we believe the rating affirmation should support both domestic and foreign investor participation in today’s auction, although domestic institutional investors are likely to remain the primary source of demand.
We forecast the fair yields for the sukuk series to be auctioned today as follows: 6.90% (range: 6.85-6.95%) for 1-mo SPNS, 7.05% (range: 7.00-7.10%) for 6-mo SPNS, 7.15% (range: 7.10-7.20%) for 9-mo SPNS, 7.10% (range: 7.05-7.15%) for 2-yr PBS030, 7.20% (range: 7.15-7.25%) for 4.3-yr PBS040, 7.25% (range: 7.20-7.30%) for 7.3-yr PBSG002, 7.30% (range: 7.25-7.35%) for 12.9-yr PBS034, and 7.35% (range: 7.30-7.40%) for 23.4-yr PBS038.
Mandiri Sekuritas Research Team
