Indonesia Sees Return of Foreign Investors Into Sovereign Debt

Indonesia’s government bonds eked out an inflow in 2025 thanks to foreign net buying in December, as investors overcame earlier concerns about a new finance minister and nationwide unrest.

The local bond market recorded $388 million in net foreign investor buying last month, the first monthly inflow since August, according to finance ministry data compiled by Bloomberg. That meant last year saw a small net inflow of $337 million, continuing an annual foreign buying trend for a third year.

Global funds dumped Indonesian bonds from September to November, about $4.6 billion in net buying, following unrest in several cities in the country and the of longtime Finance Minister Sri Mulyani Indrawati, who was well-respected by investors. Concerns about wider state budget deficits following the new finance minister’s plan to boost spending as well as on Bank Indonesia’s also hit sentiment.

“Foreign positioning in Indonesian bonds has already been very light so that even a small positive sentiment could attract inflows,” said Handy Yunianto , head of fixed income research at PT Mandiri Sekuritas in Jakarta. A weaker dollar in December and benign debt supply attracted foreign investors back to the bonds, he added.

The central bank held its policy rate in December to maintain rupiah stability amid persistent outflows, while saying it would continue to seek room for further cuts. The move eased some market worries that BI would pursue aggressive easing to align its policy with the government’s pro-growth stance.

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The foreign inflows trend might continue this year if the greenback and US Treasury yields move lower but domestic fiscal deficit concerns remain, Yunianto said.

“There are still risks coming from potential state revenue shortfall this year at a time when the government plans to spend more for its programs,” he said.