The Indonesian government bond market closed 2025 on a noteable but small change in the behaviour of foreign investors. In December, after months of relentless selling, foreign funds began to return, resulting in a net increase in the amount of money flowing into the market.
This shift came after a turbulent period that was marked by unrest in the political arena, changes of leadership at Finance Ministry, and concerns over fiscal discipline, central bank independence, and other issues.
The December data shows that while investor confidence is still fragile, the position has become so weak that minor improvements in both global and domestic conditions are enough to bring investors back.
Bloomberg reports that foreign investors bought about $388 Million in Indonesian bonds denominated in local currencies in December. This was the first inflow of foreign currency since August.
The late recovery has meant that total net foreign inflows have reached approximately $337 million for the year 2025, continuing an annual purchasing streak to a third consecutive period, although at a much slower pace.
Heavy selling for months
After a dramatic shift in the sentiment from September to November, December saw a rebound.
In the past three months, funds from around the world have sold Indonesian bonds worth $4.6 billion, erasing gains made earlier.
This sell-off occurred at the same time as unrest was raging in many cities, and Sri MulyaniIndrawati who served for 30 years had also been removed from his position. He was widely considered to be a key anchor when it came to fiscal credibility.
The investor unease is further fueled by fears that plans for increased government spending, as outlined by the new finance minister, could increase state budget deficits.
During the last quarter, there were also questions raised about the independence of Bank Indonesia. This added to the pressures on the local asset market and contributed to the sustained outflows of foreign currency.
Why December is important
In December the foreign holdings in Indonesian Bonds had shrunk considerably. The bar was therefore relatively low for new inflows.
The improved global economic conditions, such as a lower US dollar and an easier to manage supply of public debt played a part. These factors combined made Indonesian debt more attractive following months of caution.
PT Mandiri Sekuritas’ research shows that the public is now very sensitive to small positive changes.
Signal central bank
The policy decisions made also contributed to calming nerves. Bank Indonesia maintained its benchmark rate in December to maintain rupiah stability amid capital outflows.
It also said that in future it will continue to search for ways to relax policy.
The central bank’s balancing act assured the markets that it was not making aggressive reductions solely in order to boost government growth plans.
This stance helped to reduce fears about a sudden policy change and differentiated monetary policy with fiscal ambitions.
Analysts continue to warn of the risks associated with domestic finance.
Investors evaluating Indonesia’s bonds market for 2026 are concerned about the potential shortfall in state revenues, as well as plans to increase government spending.
The post Indonesian bonds gain foreign interest after stability worries ease could be updated as new information becomes available.
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