- The ongoing increase in the yield on Indonesian government bonds seems to be more influenced by external factors, such as the rising yield on UST securities, rather than reflecting a deterioration in Indonesia’s fundamentals.
- Despite the record-low bond yields in Q2-2023, the government’s strong fiscal position, driven by better-than-expected revenue, has allowed it to limit bond issuance and rely on the SAL balance.
- The use of the SAL balance in 2023 aligns with the government’s goal of reducing interest payments. The depleted SAL balance may expose the government to higher interest payments in the future given the risk of supply shocks that may put an additional burden on the government’s budget.
