Market Summary

Yield Movements

Between 3 March and 30 May, local currency (LCY) government bond yields fell for most maturities in Indonesia as heightened global market uncertainty clouded the economic outlook. The decline in yields was largely influenced by continued monetary policy easing and a weakening growth outlook. On 20–21 May, Bank Indonesia lowered its policy rate for a second time this year to 5.50% to support economic growth. The central bank also revised down its 2025 economic growth forecast to 4.6%–5.4% from estimates made in January of 4.7%–5.5%.

Local Currency Bond Market Size and Issuance

Indonesia's LCY bond market reached a size of IDR7,835.3 trillion at the end of March on growth of 1.9% quarter-on-quarter (q-o-q), largely driven by government bonds. Government bond market growth quickened to 2.7% q-o-q from 2.0% q-o-q, buoyed by increased issuance due to the front-loading strategy of the government. Corporate bonds also contributed to the overall growth, albeit to a lesser extent, on moderated growth of 2.2% q-o-q in Q1 2025 from 3.4% q-o-q in the prior quarter. Meanwhile, LCY bond issuance continued to contract in Q1 2025 amid escalating global uncertainties. Total LCY bond issuance tallied IDR638.2 trillion in Q1 2025 on a contraction of 13.2% q-o-q after declining 5.1% q-o-q in the previous quarter.

Sustainable Bond Market

By the end of March, Indonesia's sustainable bond stock reached USD14.4 billion, expanding by a slower pace of 1.9% q-o-q in Q1 2025 from 3.3% in Q4 2024, dragged down by a contraction in issuance. Green bonds remained the predominant sustainable bond instrument, representing 73.3% of the total, while sustainability bonds accounted for 21.5%. About 58.4% of the sustainable bond stock had tenors of over 5 years at the end of March, partly due to the active participation of the government, which accounted for 79.1% of total bonds carrying tenors of more than 5 years.