Investor demand for Indonesian government bonds fell to its weakest level in over a year as the rupiah weakened to 16,450 per U.S. dollar, triggering capital outflows and heightened risk aversion. The decline reflects growing concerns over fiscal sustainability and external vulnerabilities.
- Bond demand declined to a 10-month low, with auction subscription rates falling below 1.8 times.
- The rupiah weakened to 16,450 per U.S. dollar, its weakest level since early 2024.
- Capital outflows from Indonesian fixed-income markets totaled $1.2 billion in January 2026.
- Indonesia's 10-year sovereign yield rose to 7.85%, up from 7.1% at the start of the year.
- The Bank of Indonesia maintained its benchmark interest rate at 6.75% despite rising external pressures.
- Market participants are closely monitoring the government's fiscal deficit, which widened to 2.9% of GDP in Q4 2025.
Demand for Indonesian government securities dropped to a 10-month low in January 2026, with auction subscription rates falling below 1.8 times, the weakest since March 2025. This sharp contraction in investor appetite coincided with a sustained depreciation of the rupiah, which touched 16,450 against the U.S. dollar—its weakest level in nearly two years. The currency’s slide has intensified concerns about inflationary pressures and the central bank’s ability to maintain policy stability.