Jakarta. Indonesia’s government bond (SBN) and corporate bond markets are expected to maintain a positive outlook in 2026, supported by a continued global monetary easing cycle amid expectations of interest rate cuts by the Federal Reserve and other major central banks.

Declining global interest rates have pushed yields lower in developed markets, prompting global investors to seek higher returns in emerging markets, including Indonesia, according to Pefindo Fixed Income Analyst Ahmad Nasrudin.

“Domestically, monetary easing is expected to continue, although at a more moderate pace than in 2025. The funding cost environment is becoming more accommodative,” Ahmad said.

In line with this view, Pefindo projected the benchmark yield on 10-year Indonesian government bonds (SUN) to ease to a range of 5.70% – 6.20% in 2026, with a moderate level around 5.80%. This compares with a moderate projection of 6.25% for 2025.

Lower interest rates are also expected to improve issuers’ financial leverage and compress credit risk premiums, as reduced interest expenses strengthen interest coverage ratios and free cash flow.

“Beyond lowering the cost of issuing new debt securities, this environment also contributes to a narrowing of yield spreads, reflecting stronger investor confidence in domestic macroeconomic stability and issuers’ ability to manage liabilities through more efficient refinancing strategies,” Ahmad said.

From a capital flow perspective, the stabilization of yields at lower levels is likely to reshape market demand. As returns on risk-free instruments such as SBN decline, institutional investors are expected to reallocate portfolios toward higher-risk assets, including corporate bonds, to preserve return targets.

Pefindo projected corporate bond issuance in 2026 to remain solid at between Rp 154 trillion and Rp 196.86 trillion ($9.17 billion - $11.73 billion), with a midpoint of around Rp 175.77 trillion. While this marks a normalization from the 2025 record of Rp 282 trillion, partly driven by one-off issuance related to Danantara, economic fundamentals in 2026 were still seen as attractive.

“The main driver of issuance will be refinancing needs for maturing debt, which are estimated to reach Rp 156.35 trillion,” Ahmad said.

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