Indonesia’s 10-year government bond yield touched 7.7% in the week of the report, the highest level since May 2020, according to Katadata. The yield reached that level on 28 October, per Investing data, while the US 10-year Treasury yield stood at 5.05% at the 28 October close by our market data.
Costs rise with each new issue
Higher yields raise government borrowing costs, mainly on new bond issuance and refinancing of maturing debt. Most government bonds carry fixed coupons, so existing interest obligations do not change, according to Faisal Rachman, Head of Macroeconomic and Financial Market Research at Bank Permata. Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (CORE), said that if the average yield stays between 7.5% and 7.7%, additional direct interest costs could reach Rp 11-14 trillion.
Budget assumptions under pressure
The 2027 state budget allocates Rp 650.3 trillion for interest payments on debt, up from Rp 582.2 trillion in 2026. It assumes an average bond yield of 6.9%. Manilet estimated that the remaining net issuance of Rp 302 trillion, at a premium of 70-80 basis points above that assumption, would add Rp 2-2.5 trillion a year in interest costs. The impact in 2026 is still limited, he said, because the spike came near year-end.
Domestic risk, not global rates
Manilet said the widening spread between Indonesian bonds and US Treasuries shows the rise is driven more by domestic risk premiums than by global rates. As long as that premium does not fall, he said, market intervention only delays the pressure rather than lowering debt costs on a sustained basis.
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Source: Katadata | Data: U.S. Department of the Treasury
