Indications BI Rate Has Peaked, Opportunities in Bond-Based Mutual Funds

This week, Bank Indonesia is scheduled to hold its Board of Governors Meeting (RDG) on 18–19 August 2026, the monthly forum that determines the direction of the BI-Rate. This is a meeting awaited by bond market participants, because the outcome of last month’s RDG (21–22 July 2026) marked an important moment: for the first time in 2026, BI held its benchmark rate at 5.75%, after raising it three times in a row since May (from 4.75% to 5.25%, then 5.50%, to 5.75%).

The hold came alongside easing inflation data. July 2026 inflation was recorded at 2.88% year-on-year, down from the previous month and below market expectations. These two signals — the halt in rate hikes and moderating inflation — are often read by market participants as an indication that the monetary tightening cycle is approaching its peak.

It should be underlined: this is only an indication, not a certainty. BI has not yet cut interest rates, and it is very possible that the August RDG will again decide to hold. But for bond investors, the gap between “holding” and “cutting” is precisely important to understand, because bond prices do not wait for full certainty before moving.

Imagine a car travelling at high speed and the driver begins to apply the brakes. The car has not stopped, but its speed is already slowing — and the passengers inside can already feel the change long before the car comes to a complete stop. The interest rate cycle works in a similar way. When the central bank stops raising rates (the brakes begin to be applied), the bond market starts to react first, well before any actual rate cut occurs (the car comes to a complete stop).

This is because bond prices are determined by investors’ expectations of the future direction of interest rates, not only by official decisions that have already occurred. When the market begins to believe that the era of rate hikes is over, the yields on outstanding bonds tend to stabilise or fall, which means the prices of those bonds rise. Conversely, when uncertainty about the direction of rates remains high, bond prices tend to be depressed because investors demand greater risk compensation.

This phenomenon is also visible in the data. Throughout July 2026, the yield on 10-year government bonds (SBN) briefly rose to around 7.3% following global market dynamics and a leadership change within BI — Governor Perry Warjiyo resigned on 27 July 2026, with Senior Deputy Governor Destry Damayanti appointed as Acting Governor. However, as the signals of a rate hold and easing inflation strengthened, room for yields to fall again opened up — something more likely to occur precisely at the turning point of policy direction, rather than waiting for interest rates to actually be cut.

For retail investors, the most common mistake is waiting for full certainty, namely waiting for BI to actually cut interest rates before entering fixed income instruments. In reality, market repricing often occurs first, and investors who wait for 100% certainty usually have already lost some of the momentum of price increases.

What is more realistic is to pay attention to patterns, not to guess exact dates. Three things are worth monitoring each month: whether BI holds or raises rates again at the next RDG, the direction of inflation, and the movement of benchmark SBN yields. The three complement each other, and none is sufficient to be read alone.

It is also important to consider the investment horizon. Fixed income instruments, including bond-based mutual funds, are generally more suitable for medium-term goals (above one year), because short-term price fluctuations may still occur while the direction of interest rate policy is not yet fully clear.

In other words, momentum around a turning point in interest rates like this is more suitable to be exploited through actively managed and diversified instruments, rather than trying to guess which bonds will benefit.

One fixed income mutual fund that could be a consideration in this phase is Trimegah Dana Obligasi Nusantara (TDON), managed by PT Trimegah Asset Management. This mutual fund places the majority of its funds (80–100% according to investment policy) in bonds, with a focus on corporate debt securities and sukuk from various sectors, such as energy and pulp & paper.

Based on Bareksa data as of 13 August 2026, TDON recorded a return of 6.47% over the past year and 1.2% over the past month. Its assets under management also continue to grow, recorded at above Rp170 billion as of end-July 2026, up from around Rp160 billion the previous month. This reflects continued investor interest amid interest rate dynamics.

This mutual fund also won the Best Mutual Fund award in the 1-Year Fixed Income category at the Bareksa Kontan Fund Awards 2025. In addition, the Bareksa Barometer score shows 5 out of 5, meaning very good.

In terms of risk profile, TDON is classified as medium risk. TDON’s portfolio, which consists mostly of corporate bonds, carries several risks that need attention, such as credit risk and price fluctuations. This product can be one alternative for investors who have a medium-term horizon and are already prepared for such risks.