Market Summary

Yield Movements

Accommodative monetary stance by Bank Indonesia drove local currency (LCY) government bond yields down between 1 September and 31 October. Bond yields declined by an average of 35 basis points across the curve, the largest overall decline in emerging East Asia during the review period. Bank Indonesia reduced its policy rate by 25 basis points for a third consecutive month in September, lowering the rate to 4.75%. Subsequently, it held rates steady in its October meeting. Nonetheless, Bank Indonesia maintained its dovish stance, acknowledging that there remains scope for cutting rates amid low inflation expectations.

Local Currency Bond Market Size and Issuance

LCY bond market expansion in Indonesia rebounded in the third quarter (Q3) of 2025, supported by monetary easing. LCY bonds outstanding climbed to IDR7,938.0 trillion at the end of September, rising 1.4% quarter-on-quarter (q-o-q) in Q3 2025 after contracting 0.1% q-o-q in the previous quarter. Both the government (2.4% q-o-q) and corporate (3.7% q-o-q) bond segments contributed to the overall gain, as reduced borrowing costs buoyed robust issuance during Q3 2025. Aggregate issuance tallied IDR922.6 trillion in Q3 2025, gaining 45.6% q-o-q and reversing the 0.7% q-o-q contraction recorded in the prior quarter.

Sustainable Bond Market

The sustainable bond market in Indonesia expanded 12.4% q-o-q in Q3 2025, with bonds outstanding reaching USD16.1 billion at the end of September. Amid continued monetary easing, sustainable bond issuance more than doubled to USD1.9 billion during the quarter. About 65.3% of sustainable bonds outstanding at the end of September were from the public sector as the government regularly issues sustainable bonds. The active participation of the public sector contributes to the lengthened maturity profile in Indonesia's sustainable bond market.