Kuya Food Express JAKARTA. The Indonesian government is actively working to maintain stability in the State Securities (SBN) market amidst mounting global pressures and domestic financial market volatility. A crucial measure being employed is the reactivation of the Bond Stabilization Fund (BSF), designed to curb any sharp increases in government bond yields.
Currently, the yield on 10-year State Securities (SBN) has begun to show a downward trend, settling at approximately 6.7% after briefly nearing the 7% mark during the March-April 2026 period. This recent dip offers a glimmer of relief to market participants, signaling a potential stabilization.
Despite this modest decline, market players remain highly cautious about the potential for continued pressure on the bond market throughout the remainder of 2026. The current 6.7% yield is still considered elevated when compared to the approximately 6.0% level observed at the beginning of 2026, indicating underlying vulnerabilities that could resurface.
Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (CORE) Indonesia, acknowledges that the government’s intervention through the BSF has been instrumental in containing yield increases in the short term. He notes that this proactive step has played a vital role in preventing yields from spiraling higher during a period of global uncertainty.
Economist: BSF Can Stabilize Market Volatility, But Not Solve Fundamental Issues
“Regarding the future direction of SBN yields, I believe that in the short term, this intervention can indeed help anchor the 10-year yield within the 6.5%–6.8% range. The decline from previous levels close to 7% partly reflects market expectations for this stabilization,” Yusuf explained to Kontan on Friday, May 8, 2026. However, Yusuf stressed that the trajectory of SBN yields for the rest of the year will heavily depend on fundamental economic factors, both domestically and globally, which could introduce new volatility.
He projects that the 10-year SBN yield could fluctuate between 6.5% and 6.9% for the remainder of 2026, anticipating continued high volatility. A more favorable scenario, where global pressures ease, world oil prices fall, and perceptions of Indonesia’s fiscal health improve, could see yields decline further. Conversely, a sharp depreciation of the rupiah or an escalation of fiscal risks could very likely push SBN yields back above the 7% threshold, posing challenges for the market.
Yusuf highlighted four primary risks that investors should closely monitor to navigate the bond market successfully. First, there’s the persistent increase in government fiscal pressure, which could impact confidence. Second, the market continues to face a substantial supply of new State Debt Securities (SUN) issuances, potentially saturating demand and putting downward pressure on prices. Third, there’s a risk of price distortion if government intervention becomes excessively aggressive, obscuring true market signals. Fourth, a notable shift in foreign investor behavior, where funds are being reallocated from long-term SBNs to shorter-term instruments such as Bank Indonesia Rupiah Securities (SRBI).
“This indicates that while foreign funds haven’t entirely exited the market, their long-term confidence has diminished,” Yusuf elaborated, pointing to a strategic shift towards liquidity rather than a complete withdrawal of investment from Indonesia.
Amidst the currently elevated yields, Yusuf suggests that these conditions paradoxically present an attractive opportunity for long-term investors looking to enter the SBN market. He argues that current SBN yields still offer an appealing real yield, especially when considered against the backdrop of relatively low domestic inflation, making them a compelling investment proposition for those with a long-term horizon.
Nevertheless, the nature of bond investing today differs significantly from several years ago. The potential for substantial capital gains is now perceived as more limited. Consequently, a more pragmatic investment strategy would focus on consistently enjoying coupon returns rather than relying heavily on price appreciation, which has become less predictable.
“Therefore, a more suitable approach now is to enter gradually when yields rise, rather than going all-in at once,” he advised, advocating for a cautious, staggered entry. Yusuf also recommended that investors diversify their tenors to better manage the inherent risks associated with bond price volatility across different maturities.
For retail investors, instruments such as Indonesian Retail Bonds (ORI) and Retail Sukuk (SR) are expected to remain highly attractive. These government-backed offerings provide competitive coupon rates and are generally less sensitive to the daily price fluctuations often seen in the secondary bond market, making them a stable and accessible choice for individual investors seeking consistent returns.
Summary
The Indonesian government has reactivated the Bond Stabilization Fund (BSF) to manage volatility and curb rising yields in the State Securities (SBN) market. While 10-year SBN yields have slightly decreased to approximately 6.7%, CORE Indonesia economist Yusuf Rendy Manilet warns that the market remains vulnerable. He highlights four primary risks: mounting fiscal pressures, the high volume of new debt issuances, potential price distortions from government intervention, and a strategic shift by foreign investors toward shorter-term instruments like SRBI.
Looking ahead, experts project continued volatility with yields likely fluctuating between 6.5% and 6.9% for the remainder of 2026. Investors are advised to adopt a pragmatic, staggered entry strategy, focusing on consistent coupon returns rather than capital gains. Retail investors are encouraged to consider stable options such as Indonesian Retail Bonds (ORI) and Retail Sukuk (SR), which offer competitive rates with lower sensitivity to secondary market fluctuations.