FX.co ★ Indonesia 10-Year Yield Rises to 4-Year High on Mounting Concerns

Indonesia’s 10-year government bond yield climbed to 7.66%, its highest level since October 2022, as U.S. Treasury yields stayed elevated ahead of the Federal Reserve’s interest rate decision. While the Fed is widely expected to keep rates unchanged, investors are closely monitoring any signals on its future policy path. On the domestic front, uncertainty over Indonesia’s MSCI market classification has intensified worries about potential foreign capital outflows, while fiscal pressures are building as oil prices remain above USD 100 per barrel. The government’s reported plan to provide free education through university could further strain public finances, adding to an already heavy spending agenda. Inflation risks also linger, with annual inflation quickening to a three-month high of 3.28% in September, partly driven by rising food prices linked to El Niño. Last week, Bank Indonesia left its benchmark interest rate unchanged at 5.75% for the fourth consecutive month but increased its deposit facility rate by 25 bps to bolster the rupiah.