Bond Stabilisation Fund Prepared to Dampen Bond Volatility, Economist Says It Only "Buys Time"

The government plans to reactivate the Bond Stabilisation Fund (BSF) to safeguard the stability of the domestic bond market amid high global volatility and pressure on the rupiah. Finance Minister Purbaya Yudhi Sadewa stated that the instrument is being prepared as a stabilisation fund to conduct buybacks of government securities (SBN) when yields rise too sharply. Economist from the Center of Reform on Economics (CORE) Indonesia, Yusuf Rendy Manilet, said the BSF is not a new instrument. According to him, the policy framework has long been prepared as part of the protocol for stabilising the state bond market when market pressures increase. “The steps we see now are more of an escalation of efforts that were previously started through the placement of government funds in state-owned banks to help absorb SBN,” Yusuf told Kontan on Friday (8/5/2026). The instrument is considered helpful in reducing panic selling and providing room for the bond market to become more stable. However, the effectiveness of the BSF is deemed limited if market pressures stem from fundamental economic issues. “In the current context, the market is not only concerned about liquidity but also about fiscal risks, debt interest burdens, and policy consistency. So the BSF is more appropriately viewed as a tool to buy time, not a permanent solution,” he emphasised. After that, the market is expected to test yield levels that are considered appropriate to Indonesia’s fundamental risks. He also warned of the potential for price distortions if SBN purchases by domestic institutions are not fully conducted based on market mechanisms. According to Yusuf, SBN yields could appear more stable than the actual risks reflected in the market. This condition does help maintain market calm in the short term. However, in the medium term, it is considered to reduce the ability of the government and investors to fully read market pressures.