Indonesia’s 10-year government bond yield climbed to 7.14%, its highest level since early April 2025, tracking a rise in U.S. Treasury yields after stronger-than-expected U.S. jobs data reinforced expectations that the Fed may keep monetary policy tighter for longer and could still raise interest rates later this year. Domestic pressures added to the move as the government and central bank agreed to offer higher yields to attract inflows and support the rupiah, which has repeatedly fallen to record lows. Persistent capital outflows have battered Indonesian markets, with equities down more than 30% and investors wary of President Prabowo’s expansive spending plans. Fiscal risks have also mounted as fuel subsidy costs surged amid the Iran conflict, while foreign ownership of local bonds fell to near two-decade lows. Concerns over plans to centralise commodity exports further weighed on sentiment. In May, Bank Indonesia surprised markets with a 50bp rate hike to support the currency.

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