Video: Risks and Opportunities for Corporate Bonds Amid Rising Interest Rates

High interest rates and rising inflation are issues affecting Indonesia’s financial markets and investment appetite for debt instruments in 2025. Rating Director of PEFINDO, Hendro Utomo, stated that uncertainty due to geopolitical risks is creating a volatile market, and hawkish monetary policy with rising interest rates could restrain economic growth and keep bond yields high. Additionally, rising inflation is seen as potentially suppressing business activity. In facing these challenges and in an effort to encourage investment appetite in the domestic market, the government is expected to maintain the fiscal deficit below 3% of GDP to preserve the credibility of fiscal management. On the other hand, the amount of maturing corporate bonds remains quite large, which will drive demand for new debt instruments. Regarding corporate bonds, investors will remain cautious, particularly concerning the risks reflected in the bond ratings.