Bond Stabilisation Fund Seen as Capable of Dampening SBN Volatility, but Not a Cure for Structural Issues

JAKARTA, KOMPAS.com - The proposal to reactivate the Bond Stabilisation Fund (BSF) by Finance Minister Purbaya Yudhi Sadewa is considered capable of helping to dampen volatility in the government securities (SBN) market, particularly when pressure stems from short-term selling actions and market panic.

However, the effectiveness of this instrument is said not to be permanent if economic fundamentals have not improved.

Economist from Andalas University, Syafruddin Karimi, stated that the BSF essentially works by creating a buyer when bond prices fall, thereby suppressing yield spikes for a temporary period.

“The BSF can lower SBN yields temporarily if market pressure comes from technical selling, liquidity dryness, or short-term portfolio panic,” Syafruddin told Kompas.com on Friday (8/5/2026).

Meanwhile, Indonesia’s credit default swap (CDS) remains relatively controlled, with the five-year CDS around 90.042 basis points and the 10-year CDS around 142.791 basis points.

Nevertheless, Syafruddin warned that the BSF cannot serve as a permanent solution if the main pressure arises from the rupiah exchange rate and investor perceptions of domestic economic risk.

According to him, as long as the rupiah remains in the fragile range of Rp17,300-Rp17,400 per US dollar, the market will continue to demand a higher risk premium on government bonds.

“The BSF is effective as a stabilisation tool, not a structural cure,” he said.

If interventions are carried out excessively, the market will struggle to distinguish whether yield declines occur due to improving economic fundamentals or merely because the government is propping up bond prices.

Nevertheless, he believes that rule-based interventions are still necessary when the market experiences dislocations due to panic that does not reflect fundamental conditions.

“The BSF must dampen excessive volatility, not cover up fiscal risks,” he stated.

According to Syafruddin, the government needs to establish strict activation rules so that the BSF is only used when market dislocations occur, not to protect speculators’ profits.