Fixed Income Daily Update - October 28, 2026

Yesterday’s SUN auction absorbed only IDR20.65tr from IDR31.09tr in bids, below the IDR30tr indicative target, with a soft bid-to-cover of around 1.5x and demand concentrated in FR0110 and FR0111. We see the weak auction and government bond turnover of only around IDR9tr—the lowest since Jan-25 and 33% below corporate bond transactions—as reinforcing thinner market liquidity and cautious duration appetite, particularly at the long end.

Indonesia’s 10Y government bond yield rose 5bps to 7.54%, while the 2Y yield increased 4bps to 6.98%, as Rupiah weakened to IDR18,156/USD despite the 10Y UST yield easing to 4.98%. We see the wider 10Y INDOGB–UST spread at 255.8bps, CDS at 106bps, and IDR651bn of foreign equity outflows yesterday as signaling persistent domestic risk repricing, with Rupiah weakness and portfolio outflows increasingly driving bond pressure.

The government raised IDR17.01tr from SBR015, comprising IDR13.60tr from SBR015T2 and IDR3.40tr from SBR015T4, with coupons of 6.75% and 6.85%, respectively. We see strong participation from 62,529 investors, including 12,809 new SBN retail investors, as supporting funding diversification, although the heavier concentration in the 2Y tenor highlights continued investor preference for shorter duration.

The government targets up to IDR400tr in people’s credit disbursement in 2027, equivalent to around 1.5% of GDP, with KUR expected to remain a key financing channel. We see the growth impact depending more on credit quality and sectoral allocation, as construction lending surged 46% YoY in 1H26 versus manufacturing at 16% and trade at 5%, suggesting stronger government-linked financing but still requiring broader spillover into productive and labor-intensive sectors to generate a larger multiplier.