Fixed Income Daily Update - October 21, 2026

BI is expected to hike rates 25bps to 6.00% today to defend Rupiah below IDR18,000/USD, as MSCI-driven equity outflows of IDR5.6tr spill into INDOGB, pushing yields up 17bps alongside IDR310bn in daily foreign outflows. Additionally, DXY above 101 and oil prices exceeding USD100/bbl amid prolonged Middle East tensions reinforce tightening pressure, despite risks to domestic growth.

Insurance and pension funds emerged as key INDOGB buffers, recording IDR160bn in daily inflows on 16-Oct-26, second only to BI’s IDR5.8tr purchases amid broad selling pressure. Their YTD inflows reached IDR139.7tr with 20% ownership, behind BI’s IDR197.8tr purchases and 26% share, highlighting growing domestic support for bond market stability.

However, mounting intervention costs underscore the urgency for stronger BI-government coordination, as our stress test suggests Rupiah could be defended around IDR18,000/USD for only 29 months under the assumed reserve depletion pace without meaningful reforms. SRBI interest obligations from above-7% mid-year yields and continued INDOGB purchases further increase BI’s policy burden, making credible reforms essential to reduce reliance on monetary intervention.

INDOGB remained under pressure yesterday, with 10Y and 2Y yields rising 1bps and 2bps to 7.44% and 6.92%, respectively, despite the 10Y UST yield declining 2bps to 5.12%, widening the INDOGB–UST spread to 231.9bps. Rupiah strengthened 0.30% to IDR17,992/USD as DXY eased 0.21% to 101.768, providing temporary FX relief while domestic risk premiums remained elevated.