Indonesia’s offshore bond offering attracted strong interest this week, which included $1.3bn (CNY 9.25bn) raised via yuan-denominated papers and $3.2bn (EUR 2.7bn) in three-part euro notes. This marked the country’s largest global bond sale in nearly a decade totaling $4.5bn and only the second dim sum bond since Oct25 to tap attractive yuan borrowing costs. Firm demand for these debt instruments implied that offshore investors still view the sovereign’s risk-return profile favorably, amid cautious signals from S&P. In comments over a webinar, the rating agency signaled that fiscal developments will be watched closely, especially rising debt servicing costs and trailing revenue growth, while emphasizing the need to adhere to a medium-term consolidation framework. As noted earlier, separately Indonesia’s securities regulator and the stock exchange have continued to unveil fresh measures to address transparency and free float requirements raised by MSCI i.e. index provider earlier in the year.
The January budget recorded a modest deficit at the start of the year (-0.2% of GDP), marking a departure from the customary surplus typically seen during the same period. Spending jumped by a sharp 26% yoy in Jan26 compared to more subdued pace in the past, while revenue growth trailed at 9.8% yoy despite favourable base effects (Jan25 at -27% yoy). Bulk of the spending was channeled through social sector schemes and capital projects, with ~IDR809trn set aside for 1Q26. We had noted earlier that the government has been keen to fast-track expenditure to boost growth, amid expectations that this would draw in the private sector and improve livelihood of low-income households via to the social free meal and other programs. The fiscal path will be under close watch this year, after 2025’s deficit neared the mandatory -3% of GDP threshold. Benchmark 10Y bond yields have been rangebound this week witnessing a return in secondary market demand, whilst the short end held ground amidst rising cut-off yields for SRBIs, which has attracted renewed investor interest.
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