Market Brief
Indonesia’s local-currency government bond market closed on a softer note yesterday, with yields rising by 1–8 bps across most of the curve. The benchmark 10-year yield edged up 1 bp to 6.78%. On the FX front, the Rupiah weakened further to IDR17,705/USD from IDR17,668/USD previously. Secondary market activity softened, with outright transaction volume in government securities declining to IDR23.8 trillion from IDR24.8 trillion in the previous session. Meanwhile, corporate bond trading volume stood at IDR4.4 trillion. Indonesia’s USD-denominated sovereign bonds also came under pressure, with yields on INDO-31, INDO-34, and INDO-54 rising to 4.72% (+3 bps), 5.27% (+4 bps), and 5.81% (+4 bps), respectively.
U.S. Treasury yields moved higher, led by the long end of the curve, as inflation concerns and higher-for-longer Fed expectations continued to weigh on global fixed income markets. By the close, the 2Y, 5Y, 10Y, and 30Y yields rose to 4.11% (+6 bps), 4.31% (+7 bps), 4.66% (+7 bps), and 5.17% (+4 bps), respectively. European sovereign yields also climbed, with the 10-year yield closing at 3.19% (+4 bps) in Germany, 5.13% (+3 bps) in the UK, and 3.83% (+5 bps) in France. The sell-off was mainly driven by growing concerns that the recent rise in oil prices could keep inflation elevated for longer, thereby limiting the Fed’s room to ease policy. Although President Trump delayed planned strikes on Iran at the request of Gulf nations, markets viewed the decision as only a temporary reprieve, as the broader conflict continues to cloud the outlook for Middle East energy supply normalization. The rates market is increasingly reassessing the Fed’s policy path. Investors are no longer focused solely on the timing of potential rate cuts, but are also beginning to price in the risk that the Fed’s next policy move could be a hike. Recent inflation data, stronger labor-market indicators, and resilient consumer demand have reinforced expectations that the Fed may need to maintain a restrictive stance for longer. On the data front, U.S. Pending Home Sales rose 1.4% MoM in April, slightly below the 1.6% consensus estimate, while the March figure was revised higher to 1.7%. However, the softer housing data did little to offset the broader bearish tone in bonds, as markets remained more focused on inflation risks, elevated oil prices, the upcoming 20-year Treasury auction, and the release of the FOMC minutes. Overall, Treasury yields remain biased higher as markets continue to price in a more inflation-sensitive policy outlook, with the 30-year yield approaching levels that could trigger broader risk-asset pressure should the move persist.
Domestic bonds may face another test today from both policy and currency signals, with Bank Indonesia’s policy-rate decision taking center stage following further Rupiah weakness and the continued rise in global yields. Bloomberg consensus expects a 25 bps hike in the BI Rate to 5.00%, as policymakers seek to reinforce currency stability amid elevated global yields and persistent external volatility.
Fixed Income News
• The Government of Indonesia successfully raised IDR12.0 trillion from yesterday’s sukuk auction, in line with its indicative issuance target.
• PT Chandra Asri Pacific Tbk (TPIA) is set to issue Shelf Registration Bond V Chandra Asri Pacific Phase III 2026, with a total issuance target of IDR2.3 trillion.
