Foreign investors return to Indonesian sovereign debt
A weaker US dollar in December and benign debt supply have attracted oversea investors back to government bonds
[JAKARTA] Indonesia’s government bonds eked out an inflow in 2025 thanks to foreign net buying in December, as investors overcame earlier concerns about a new finance minister and nationwide unrest.
The local bond market recorded US$388 million in net foreign investor buying in December, the first monthly inflow since August, indicated finance ministry data compiled by Bloomberg.
Last year’s small net inflow of US$337 million was the continuation of an annual foreign buying trend for a third year.
Global funds dumped Indonesian bonds from September to November, erasing about US$4.6 billion in net buying, following unrest in several cities in the country, and the firing of longtime Finance Minister Sri Mulyani Indrawati, who was well respected by investors.
Concerns about wider state budget deficits following the new finance minister’s plan to boost spending, as well as on Bank Indonesia’s (BI) independence, also hit sentiment.
“Foreign positioning in Indonesian bonds has already been very light, so that even a small positive sentiment could attract inflows,” said Handy Yunianto, head of fixed income research at Mandiri Sekuritas in Jakarta.
A weaker US dollar in December and benign debt supply attracted foreign investors back to the bonds, he added.
The central bank held its policy rate unchanged in December to maintain rupiah stability amid persistent outflows, while saying it would continue to seek room for further cuts.
The move eased some market worries that the BI would pursue aggressive easing, to align its policy with the government’s pro-growth stance.
The foreign inflows trend might continue this year if the greenback and US Treasury yields move lower, but domestic fiscal deficit concerns remain, Yunianto noted.
“There are still risks coming from a potential state revenue shortfall this year, at a time when the government plans to spend more for its programmes,” he said. BLOOMBERG
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