FX.co ★ Indonesia 10-Year Yield Hits Highest Since April 2025

Indonesia’s 10-year government bond yield has risen to 7.14%, its highest level since early April 2025, mirroring the climb in U.S. Treasury yields after stronger-than-expected U.S. employment data reinforced expectations that the Federal Reserve may keep monetary policy tighter for longer and could still raise interest rates later this year. Domestic factors have amplified the move, as the government and the central bank agreed to offer higher yields to attract foreign inflows and shore up the rupiah, which has repeatedly slipped to record lows. Persistent capital outflows have hit Indonesian assets hard, with equities down more than 30% and investors increasingly cautious about President Prabowo’s ambitious spending agenda. Fiscal risks have grown as fuel subsidy costs have surged amid the conflict involving Iran, while foreign ownership of local bonds has dropped to near 20-year lows. Market sentiment has been further undermined by concerns over plans to centralise commodity exports. In May, Bank Indonesia surprised investors with a 50bp rate hike aimed at supporting the currency.