Indonesian Government Bond Market Outlook for 2026

Increased Bond Issuance Expected

The Indonesian government bond market is poised for increased issuance in early 2026, with a particular focus on US dollar-denominated bonds. According to Lionel Priyadi, Fixed Income & Macro Strategist at Mega Capital Sekuritas, the upcoming issuance will be driven by maturing US dollar-denominated bonds amounting to US$ 3.82 billion in Q1-2026.

Factors Driving Yield Reduction

The yield on Indonesian government bonds, also known as Surat Berharga Negara (SBN), has decreased significantly throughout 2025. This decline is attributed to two main factors:

1. Bank Indonesia's Monetary Policy: The central bank has cut interest rates by 125 basis points this year, putting downward pressure on SBN yields.
2. Fiscal Injections by the Ministry of Finance: The government's fiscal stimulus measures have increased domestic liquidity, further contributing to the decline in yields.

Market Outlook and Implications

Lionel Priyadi noted that the high domestic liquidity resulting from the government's fiscal injections, combined with BI's rate cuts, has been the primary driver of the yield reduction this year. Looking ahead to 2026, the market is expected to see a continuation of these trends, with the government likely to issue more bonds to manage its maturing debt obligations.

The focus on US dollar-denominated bonds in the upcoming issuance is largely driven by the US$ 3.82 billion in maturing bonds in the first quarter of 2026. This strategic decision is likely aimed at managing foreign currency debt obligations while taking advantage of favorable market conditions.