Indonesia’s Yield Curve May Steepen as BI Unwinds Intervention

Indonesia’s sovereign yield curve is set to steepen as the central bank reduces its use of short-term rupiah securities, prompting a shift in demand toward government bonds.

The spread between 2- and 10-year bond yields this week reached the widest since June 2023. Bank Indonesia is in an interest-rate cutting cycle and investors are redirecting funds from a set of rupiah-denominated tools, so-called SRBI securities, into sovereign bonds — thus likely sinking front-end yields.