Josua Pardede, chief economist at Permata Bank, warns that elevating bond yields is not a sustainable solution for Indonesia’s auction demand issues amid external pressures and market resilience.
Indonesia should avoid treating higher government bond yields as a simple cure for weak demand at auctions, according to Josua Pardede, chief economist at Permata Bank, who said the market pressure is real but that lifting returns across the board would be the wrong response. He was speaking to jpnn.com as Suahasil Nazara took over as finance minister. The immediate challenge is the recent climb in yields on Surat Berharga Negara, or SBN, which are the government’s rupiah-denominated debt securities.
As of September 11, the yield on the benchmark 10-year SBN stood at about 7.15%, up 108 basis points from the start of the year, jpnn.com reported. Josua argued that this level is still within the risk band used in the 2027 state budget note, which assumes a range of 6.5% to 7.3% with a midpoint of 6.9%. In his view, that suggests the market is under strain but not facing a funding shock that would justify a blunt upward reset in borrowing costs.
He also said the recent rise cannot be blamed entirely on Indonesia’s fiscal position. The Financial Stability System Committee has said the 10-year yield touched 7.29% at the end of July, as global turbulence, including Middle East tensions and higher energy prices, rattled investors. Other external pressures have included global inflation, higher overseas bond yields and capital outflows from riskier assets. Even so, foreigners have still been net buyers of domestic SBN, indicating that confidence has not disappeared.
That broader context matters because other market watchers see the yield move as part of a more stabilised picture rather than the start of a fresh sell-off. Mandiri Sekuritas has projected the 10-year yield could end 2026 in the 6.8% to 7.0% range, citing resilient domestic growth and easing funding pressure. Josua has also warned in separate comments that policy fixes aimed at suppressing yields, including large liquidity injections, may only buy time if they do not address the deeper competition for funds in the banking system.
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