Indonesia 10Y Bond Yield Hits 13-month High

Indonesia’s 10-year government bond yield climbed to 7.14%, its highest level since early April 2025, tracking a rise in U.S. Treasury yields after stronger-than-expected U.S. jobs data reinforced expectations that the Fed may keep monetary policy tighter for longer and could still raise interest rates later this year. Domestic pressures added to the move as the government and central bank agreed to offer higher yields to lure investors and support the rupiah, which has repeatedly fallen to record lows. Persistent capital outflows have battered Indonesian markets, with stocks down more than 30% and traders wary of President Prabowo’s expansive spending plans. Fiscal risks have also mounted as fuel subsidy costs surged amid the Iran war, while foreign ownership of local bonds fell to near two-decade lows. Concerns over plans to centralise commodity exports further weighed on sentiment. In May, Bank Indonesia surprised markets with a 50bp rate hike, the first adjustment since October.

Indonesia 10 Year Government Bond Yield increased to 7.14%, the highest since April 2025. Over the past 4 weeks, Indonesia 10Y Bond Yield gained 20.10 basis points, and in the last 12 months, it increased 15.35 basis points.

Indonesia’s 10-year bond yield increased to 6.85%, hovering near a three-week high after U.S. Treasury yields hit a 16-month peak. Inflationary pressures linked to the Middle East conflict reinforced views that the Fed could raise interest rates later this year, prompting investors to reduce exposure to emerging-market assets. Locally, pressure on bonds mounted as the rupiah repeatedly slid to fresh record lows against the U.S. dollar since April, fuelling concerns over capital outflows and imported inflation. Traders also stayed cautious ahead of Bank Indonesia’s policy meeting later this week, as markets weighed the possibility of a rate hike to support the currency. President Prabowo Subianto, meanwhile, dismissed concerns that the rupiah’s weakness reflected a weakening economy. Still, upward pressure on yields was partly capped by the government’s recent move to launch a bond stabilisation fund aimed at supporting the debt market.