Risk premiums remain elevated despite BI's stabilization efforts
Unlike previous auctions where demand was heavily concentrated in longer tenors, investor preference shifted toward shorter maturities, with the 6M tenor accounting for IDR3.7tr or around 67% of total awarded amounts, indicating a more cautious stance amid ongoing uncertainty and expectations of further policy tightening. The shift in demand was accompanied by a narrowing spread between the 12M and 6M SRBI yields to just 31bps, the tightest level in Jun 26, suggesting investors increasingly favor liquidity and shorter duration exposure despite elevated yield levels. In our view, the increase in SRBI yields was also influenced by BI’s decision to raise its policy rate by another 25bps to 5.75%, as the central bank continues to prioritize external stability and maintain competitive returns to attract foreign inflows.
Unlike previous auctions where demand was heavily concentrated in longer tenors, investor preference shifted toward shorter maturities, with the 6M tenor accounting for IDR3.7tr or around 67% of total awarded amounts, indicating a more cautious stance amid ongoing uncertainty and expectations of further policy tightening. The shift in demand was accompanied by a narrowing spread between the 12M and 6M SRBI yields to just 31bps, the tightest level in Jun-26, suggesting investors increasingly favor liquidity and shorter-duration exposure despite elevated yield levels. In our view, the increase in SRBI yields was also influenced by BI’s decision to raise its policy rate by another 25bps to 5.75%, as the central bank continues to prioritize external stability and maintain competitive returns to attract foreign inflows.
The government clarified the legal protection framework for investors participating in Patriot Bond and Merah Putih Bond, emphasizing that the protection applies only to funds invested in the designated instruments issued by Danantara and does not extend to investors’ broader business activities or assets. Finance Minister stressed that while the source of funds used to purchase the bonds will not be subject to legal or tax scrutiny, any separate business activities remain fully subject to existing tax, legal, and regulatory enforcement, highlighting that the scheme is not equivalent to a broad- based tax amnesty program. The policy is primarily aimed at attracting offshore and undeclared domestic funds back into Indonesia’s financial system to support investment and economic financing needs, particularly through Danantara’s strategic funding programs.
