Market Brief
Indonesia’s local-currency government bond market advanced on Tuesday, supported by firmer trading volumes amid apparent year-end window-dressing activity as investors sought to enhance portfolio return profiles. Government bond yields declined by 1–5 bps across the curve, with the 10-year benchmark yield falling by 2 bps to 6.12%. In the foreign exchange market, the rupiah strengthened modestly to IDR16,680/USD. Market liquidity improved, with outright government bond turnover rising to IDR17.5 trillion, up from IDR12.1 trillion on Monday, while corporate bond trading amounted to IDR2.2 trillion. Meanwhile, USD-denominated Indonesian sovereign bonds were largely range-bound, with yields on Indo-30, Indo-35, and Indo-54 closing at 4.30%, 4.85%, and 5.33%, respectively.
U.S. Treasuries closed the final, shortened trading session of 2025 under pressure, with yields ending near session highs following stronger-than-expected labor market data and reaffirmed Federal Reserve caution. Initial jobless claims declined to 199,000—well below Bloomberg consensus of 218,000 and among the lowest readings of the year—highlighting continued labor market resilience despite slower hiring momentum and a rising unemployment rate. The data reinforced perceptions that labor market conditions remain sufficiently tight, undermining expectations for near-term policy easing and triggering a broad-based selloff across the Treasury curve. Upward pressure on U.S. Treasury yields was further amplified by the release of the December FOMC minutes, which emphasized the conditional and data-dependent nature of any future rate cuts. While most policymakers acknowledged that additional easing could be warranted should disinflation continue, several highlighted that the December policy decision was finely balanced, reflecting heightened sensitivity to inflation risks. The minutes underscored concerns that premature or aggressive easing could reignite inflationary pressures or be interpreted as a dilution of the Fed’s commitment to its 2% inflation target. Collectively, these developments point to a more cautious policy outlook heading into 2026, with resilient labor data and a vigilant, internally divided Fed weighing on bond valuations. As a result, the 2-year, 5-year, 10-year, and 30-year U.S. Treasury yields rose to 3.48% (+3 bps), 3.73% (+5 bps), 4.17% (+5 bps), and 4.85% (+4 bps), respectively. European government bond markets were mixed but largely range-bound, with 10-year yields in Germany, the UK, and France closing at 2.85%, 4.48%, and 3.56%, respectively.
Indonesia’s bond market is likely to trade around flat levels on the first trading day of the year, as investors adopt a cautious stance amid lingering uncertainty over the pace and magnitude of future Fed rate cuts. Attention is expected to shift to key domestic macroeconomic releases scheduled for today. Bloomberg consensus forecasts December CPI at 0.63% MoM and 2.80% YoY, with core inflation expected to edge up to 2.42% YoY. In addition, Indonesia is projected to post an extended trade surplus in November, with consensus expectations at USD3.0 billion, up from USD2.4 billion in the previous month.
Fixed Income News
• PEFINDO has assigned PT Maxima Daya Indonesia (MDI) an idA- rating with a stable outlook.
• PEFINDO has affirmed the idAA- rating on PT Sinar Mas Agro Resources and Technology Tbk’s (SMAR) Shelf Registered Bond II Phase III Year 2021 Series C.
