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SOVEREIGN DEBT - JAKARTA. The government has set the yield of 10-year government securities (SBN) at 7.1%. This projection is expected to put pressure on corporate bond issuance.
Fikri C. Permana, Senior Economist at KB Valbury Securities, stated that the government appears to be cautious for 2025. This is evident from the expected exchange rate of the rupiah, which is estimated at Rp 16,100 per US dollar.
"This indicates that the government is somewhat cautious about exchange rate stability and anticipates a current account deficit next year," he told Kontan.co.id on Wednesday (21/8).
With this assumption, the yield of the SBN 2025 is set at 7.1%. Fikri believes that if the yield reaches this level, it will be burdensome for both corporations and the government.
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Suhindarto, Head of the Economic Research Division at Pefindo, mentioned that corporate bond coupons will use government bonds as their benchmark. "If the yield from the SBN remains high, the cost of funds for corporations will also follow," he explained.
Josua Pardede, Chief Economist at Bank Permata, explained that sentiment in the bond market will be mixed next year. Positive sentiment comes from interest rate cuts, while negative sentiment comes from an increase in supply in the bond market.
However, he believes the potential for a yield of 7.1% is minimal. This is because the Fed is expected to cut its interest rate by 50bps this year and 75bps in 2025. This provides room for Bank Indonesia (BI) to cut its interest rate.
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In addition, when drafting the 2025 state budget, the government did not consider cutting interest rates. "So I see the potential for a revised state budget because some assumptions and postures have not yet been adjusted to the medium-term development plan and the work plan after the president is elected," he said.
Josua also reflected on this year, which also saw a widening deficit, but the government was able to keep bond issuance in the second semester from increasing. As a result, coupled with expectations of interest rate cuts, the yield fell again.
From the exchange rate perspective, he continued, with the current economic conditions, the rupiah will be in the range of Rp 15,500 per US dollar-Rp 15,900 per US dollar in 2024. Then next year, based on his calculations, it is estimated to be in the range of Rp 14,900 per US dollar-Rp 15,300 per US dollar.
Based on this, Josua believes the ideal yield is below 7%. "Around 6.3%-6.6%," he said.
Ramdhan Ario Maruto, Associate Director of Fixed Income at Anugerah Securities, said that the strong foreign inflow and still good liquidity also have an effect on the movement of yield.
If the current conditions continue, he projects the yield of the SBN in 2025 will be in the range of 6%-6.5%. "Now it's just a matter of time before the yield reaches 6.5%," he added.
