Foreign Investors Flock Back to Indonesia: Government Bonds Hunted, Rupiah Strengthens

Foreign investors are once again flocking to purchase Indonesian Government Securities (SBN). Data from the Ministry of Finance shows that additional SBN ownership, or net buy, reached Rp11.68 trillion per day on Thursday (20/8/2026). This daily net buy is the highest throughout 2026.

The foreign inflows also include those absorbed by the government through the Government Debt Securities (SUN) auction on Tuesday (18/8/2026). The SUN auction last Tuesday reflected the strong interest of foreign investors returning to Indonesia.

Ministry of Finance data recorded incoming bids from foreign investors reaching Rp17.23 trillion at the SUN auction on 18 August 2026. This amount was equivalent to 20.33% of the total incoming bids, which reached Rp84.76 trillion.

The government decided to absorb Rp10.42 trillion from foreign investors, equivalent to 30.65% of the total amount taken at the auction (Rp34 trillion). The number of foreign investors participating and the funds absorbed were very large.

Based on Ministry of Finance data from 2019-2024, the amount of foreign bids received was the highest since 20 August 2024 (Rp24.48 trillion). Meanwhile, the foreign funds absorbed at yesterday’s auction were the highest since 17 January 2023, or more than 3.5 years (Rp10.74 trillion).

Nominal foreign ownership in SBN as of 20 August 2026 has now reached Rp909.04 trillion. This figure increased by Rp30.3 trillion compared to the end of 2025. In percentage terms, foreign ownership has begun to climb to 12.97% from its lowest point this year in April (12.56%).

Overall, the auction on 18 August also showed that investor interest, both domestic and foreign, remained high. Total incoming bids, both from domestic and foreign investors, reached Rp84.76 trillion. This amount was the highest since the first auction at the beginning of the year.

The weighted average yield won also declined. The 5-year benchmark series FR 0110, for example, fell to 7.008% on 18 August from 7.295% at the 4 August auction. This decline in yield is good news because the government can issue debt at lower interest costs.

The strong flow of foreign funds cannot be separated from improving investor sentiment towards Indonesian assets. A number of Bank Indonesia (BI) policies to attract foreign funds, coupled with intervention in the foreign exchange market, have also supported the strengthening of the rupiah.

Throughout August 2026, the rupiah has strengthened by around 1.58%, after falling for five consecutive months previously. Positive sentiment was also reinforced by BI’s decision to hold the benchmark interest rate in its latest policy meeting in August 2026.

BI also expanded its hedging incentive programme to encourage foreign funds to enter the domestic market. The strengthening of the rupiah was supported by BI’s steps to optimise various monetary instruments while expanding incentives to encourage foreign portfolio investment inflows.

BI increased the sell swap hedging incentive to 12.5%, while the sell Domestic Non-Delivery Forward (DNDF) hedging incentive was set at 15%. To strengthen local currency transactions (LCT) with partner countries, BI also provided a buy swap hedging premium of 10% and reduced the sell DNDF hedging premium by 10%. These policies were directed at maintaining rupiah stability while deepening the money market and foreign exchange market (PUVA).

BI also decided to reduce the frequency of issuing Bank Indonesia Rupiah Securities (SRBI) from weekly to once every two weeks. By reducing auctions, BI absorbs less liquidity, so liquidity in the financial system will be larger and looser.

In addition to monetary policy, Indonesia’s fiscal prospects have also provided a breath of fresh air for the SBN market. President Prabowo Subianto’s plan to reduce the state budget deficit next year is considered capable of improving fiscal credibility and strengthening the attractiveness of government bonds.

In the 2027 State Budget Draft (RAPBN), the government is targeting a budget deficit of Rp671.2 trillion, or 2.40% of Gross Domestic Product (GDP). This figure is lower than the 2026 State Budget deficit target of 2.68% of GDP with financing of Rp689.1 trillion.