Jakarta. Indonesia’s government bond (SUN) auctions are expected to remain resilient toward year-end despite a still-fragile market mood, with domestic investors continuing to anchor demand even as fiscal pressures and foreign capital outflows weigh on sentiment.

Yusuf Rendy Manilet, economist at the Centre of Reform on Economics (CORE) Indonesia, said trading patterns throughout 2025 show a widening gap between domestic and foreign appetite for government bonds.

“Concerns over fiscal conditions, foreign capital outflows, and domestic policy uncertainty continue to dampen foreign interest. Throughout 2025, non-resident positions in government bonds have repeatedly posted outflows,” Yusuf said.

Yusuf noted that pressures have intensified amid expectations of higher government spending and political dynamics that elevate perceived risks. Still, robust liquidity among domestic investors has helped stabilize the sovereign bond (SBN) market.

“On the other hand, corporate bonds remain less attractive due to liquidity issues and creditworthiness concerns,” he added.

Yields are also expected to climb. Yusuf projects the 10-year government bond yield could move toward 6.75 percent, up from around 6.31 percent at the end of November 2025.

“The rise in yields is driven by fiscal strain and continued foreign outflows. While Bank Indonesia’s relatively accommodative monetary stance may cap the pace of increases in the short term, investors remain cautious about slowing credit growth, global uncertainty, and domestic policies affecting corporate liquidity,” he said.

Despite mixed sentiment, domestic bond auctions continue to show strength. The Nov. 25 government bond auction drew more than Rp 34 trillion in bids, surpassing the government’s indicative target, with domestic investors leading the demand, a sign of ongoing confidence in sovereign instruments amid market volatility.

Yusuf said the investor pattern remains consistent with trends seen throughout 2025. Short- to medium-term series such as SPNS and PBS remain the most sought-after thanks to competitive yields and strong liquidity. Meanwhile, the 10-year tenor continues to appeal as long as expectations for monetary easing by Bank Indonesia hold.

With steady domestic demand and a likely upward path for yields, investors see the outlook for government bond auctions from late 2025 into early 2026 as broadly positive. Key variables to watch include the government’s fiscal policy direction, the scale of foreign fund flows, and Bank Indonesia’s monetary stance.

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