Market Summary

Yield Movements

Local currency (LCY) government bond yields in Indonesia collectively rose between 3 November and 6 February, rising an average of 19 basis points across the curve. Yields gained as investor sentiment was dampened over an equities market rout that occurred in January in response to MSCI warnings about a potential reduction in Indonesia's stock weighting in the MSCI Emerging Market Index or even a possible downgrade of Indonesia's stock market classification to the Frontier Market Index. In addition, concerns over the government's fiscal policy contributed to the negative sentiment as 2025's budget deficit nearly breached the 3.0% statutory debt limit. Yields also rose as Moody's downgraded Indonesia's sovereign credit rating outlook from stable to negative in February.

Local Currency Bond Market Size and Issuance

Indonesia's LCY bond market reached IDR8,067.1 trillion, with the expansion inching up to 1.6% quarter-on-quarter (q-o-q) in the fourth quarter (Q4) of 2025 from 1.4% q-o-q in the third quarter. Despite a slowdown in issuance, outstanding corporate bonds and government bonds gained 3.9% q-o-q and 1.7% q-o-q, respectively, in Q4 2025. Total LCY bond issuance tallied IDR921.7 trillion in Q4 2025 on a marginal decline of 0.1% q-o-q. Government bond issuance contracted as the government had mostly fulfilled its annual borrowing in the prior quarters while corporate bond issuance fell due to a high base effect resulting from the third quarter.

Sustainable Bond Market

Sustainable bonds outstanding in Indonesia expanded 23.7% year-on-year (y-o-y) in 2025, up from a 17.4% y-o-y gain in 2024, to reach USD17.5 billion at the end of December. The expansion lifted Indonesia's hare of emerging East Asia's sustainable bond total to 2.3% in 2025 from 2.0% a year earlier. Favorable financial conditions bolstered issuance during the year, rising 34.5% y-o-y to USD4.5 billion. Of this amount, 67.1% came from the Government of Indonesia, the largest of which was the USD1.1 billion green sukuk issued in July and the October. The active participation of the public sector in the sustainable bond market contributed to the lengthening of the maturity structure.