Jakarta. Indonesia’s government bond market remains under pressure heading into the fourth week of February 2026, with yields staying elevated after a shift in the country’s credit outlook by Moody's Ratings.

The change in Indonesia’s outlook from stable to negative has heightened risk perception, reflected in the 10-year government securities or Surat Berharga Negara (SBN) yield hovering in the 6.38%–6.45% range.

Economist Yusuf Rendy Manilet of Center of Reform on Economics (CORE) Indonesia said the SBN market remains in a consolidation phase with relatively high volatility. Persistent foreign fund outflows since the start of the year have prompted domestic investors to be more selective, while global investors are demanding higher risk premiums.

“Yields that are stable but relatively high indicate the market has not fully recovered from outflow pressures. Investors are still assessing the impact of Moody’s outlook revision and developments in global interest rate direction, particularly expectations of rate cuts by the Federal Reserve,” Yusuf said on Monday.

He added that geopolitical tensions, domestic fiscal prospects, and global index developments such as adjustments by MSCI Inc. are also influencing sentiment toward rupiah-denominated assets.

Regarding the government’s decision not to hold a government bond (SUN) auction next week, Yusuf stressed that it is unrelated to weak demand and is purely part of a financing strategy planned by the Finance Ministry. “This is not an issue of weak demand. The government is implementing a flexible issuance schedule to maintain market balance, including providing a gap between regular auctions and retail SBN issuance. In the last auction, realized issuance actually exceeded the indicative target,” he said.

Yusuf said that while current market conditions are not yet fully conducive, they do not pose a threat to state financing. Still, he acknowledged structural factors that have recently softened SBN demand.

Externally, global uncertainty and high interest rates in advanced economies are pushing foreign investors to seek higher returns to hold emerging market assets such as Indonesia.

Domestically, concerns over fiscal prospects, rising refinancing needs due to large debt maturities this year, and perceived policy risks are weighing on investor sentiment. “In this environment, the role of domestic investors and market stabilization by Bank Indonesia is crucial to prevent excessive volatility,” he said.

Despite short-term moderation in demand, Yusuf expects total SBN issuance in 2026 to increase compared to last year, driven by larger refinancing requirements and financing for the state budget deficit. “With a diversified issuance strategy between institutional and retail markets, and a strong domestic investor base, Indonesia’s SBN market is expected to remain stable in the medium term,” he said.

“If global pressures ease and global interest rates begin to decline, SBN yields have the potential to fall and investor demand will gradually recover. Fundamentally, Indonesia’s SBN market remains resilient,” Yusuf concluded.

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