Market Brief
Indonesia’s local-currency bonds exhibited a mixed performance, with yields shifting within a narrow range of 1–8 bps across the curve. The benchmark 10-year yield rose by 4 bps to 6.69%. In the FX market, the rupiah extended its depreciation trend, weakening to IDR17,105/USD from IDR17,035/USD previously. Secondary market activity strengthened notably, with outright transaction volume increasing to IDR25.6 trillion from IDR19.3 trillion in the prior session, while corporate bond trading reached IDR5.8 trillion. In the offshore market, Indonesia’s USD-denominated sovereign bonds traded largely sideways. Yields on INDO-31, INDO-36, and INDO-54 settled at 4.85% (unchanged), 5.40% (-2 bps), and 5.71% (-1 bp), respectively.
U.S. Treasury yields declined across the curve, supported by moderating oil price momentum and a partial easing of near-term geopolitical risks, although overall uncertainty remains elevated. At the close, yields on the 2Y, 5Y, 10Y, and 30Y tenors fell to 3.80% (-5 bps), 3.94% (-4 bps), 4.30% (-3 bps), and 4.88% (-1 bp), respectively. The rally in U.S. Treasuries was underpinned by stabilization in oil prices following earlier volatility, amid reports that diplomatic channels remain open. Notably, discussions include a potential delay to the U.S. deadline for Iran to reopen the Strait of Hormuz. While President Trump had previously signaled the possibility of targeting Iranian infrastructure if conditions were unmet, the prospect of delayed action and continued mediation efforts has helped temper immediate escalation risks. Nevertheless, geopolitical tensions remain elevated, as Iran has rejected ceasefire proposals and negotiations appear stalled, leaving markets highly sensitive to further developments. On the macroeconomic front, incoming data presented a mixed picture. Durable goods orders declined by 1.4% MoM in February (vs. +0.5% consensus; prior -0.5%), largely driven by weakness in transportation. However, core capital goods orders rose by 0.8% (vs. 0.5% consensus), suggesting continued resilience in underlying business investment. Meanwhile, consumer credit expanded by USD9.5bn (vs. USD7.0bn consensus; prior USD7.7bn), indicating steady household borrowing. On the supply side, a USD58bn 3-year Treasury auction recorded solid demand, with a bid-to-cover ratio of 2.68x (vs. 2.55x prior), providing additional support to the broader rally. In contrast, European sovereign yields moved higher, reflecting divergence in global rate dynamics. The 10-year yields increased to 3.08% (+9 bps) in Germany, 4.83% (+7 bps) in the UK, and 3.68% (+10 bps) in France.
In the near term, Indonesia’s bond market is expected to trade with a cautious yet slightly firmer bias, supported by the decline in U.S. Treasury yields as easing oil price momentum alleviates immediate inflationary concerns. While the moderation in global yields may provide temporary support, market sentiment is likely to remain highly sensitive to ongoing geopolitical developments in the Middle East, particularly negotiations surrounding the reopening of the Strait of Hormuz.
Fixed Income News
• The Government of Indonesia successfully raised IDR15.0 trillion in yesterday’s sukuk auction, surpassing the indicative target of IDR12.0 trillion.
• PT Merdeka Battery Materials Tbk (MBMA) is set to issue Shelf Registration Bond I Merdeka Battery Materials Phase IV 2026 totaling IDR2.50 trillion, alongside Shelf Registration Sukuk Mudharabah I Phase IV 2026 amounting to IDR662.13 billion.
