The demand for government retail bonds is diminishing amid eroding market trust due to economic policies.
THE government bond market is showing signs of decline. The weakening investor demand is apparent in the lack of interest in the Retail Government Bond Series ORI029, the government’s first security bond in 2026. Of the indicative target of Rp25 trillion, only 58 percent, or around Rp14.44 trillion was raised.
This is the first time ORI failed to sell. Since its inaugural issuance in 2006, this retail bond has almost always been sold out. The previous offer, ORI028, issued in October 2025, for example, managed to collect Rp15.5 trillion. Even though the target was not met, the shortfall was small. For example, ORI025 raised Rp23.9 trillion from the Rp25 trillion target at the start of 2024.
There are three reasons that caused ORI029 to slump. First, the uncompetitive coupon rate. This debt bond offered a 5.45 percent yield for a tenor of three years, and 5.80 percent for a tenor of six years. These figures are deemed less attractive compared with the 10-year government bond, which offers an annual yield of 6.3-6.4 percent. Even deposit interest rates from major banks range from 5 to 6 percent.
The second factor is gold fever. Global economic and political uncertainty has shifted investor appetite toward assets perceived as safe havens during times of crisis. Simultaneously, public preference has pivoted toward more liquid instruments. Banking data shows that growth in current accounts reached 24.9 percent, significantly outstripping time deposits.
Thirdly, household liquidity cycles. The ORI029 offering in January-February coincided with a period of high consumer spending: following the year-end holidays, the Lunar New Year celebrations, and the lead-up to Ramadan fasting month. In this situation, the public’s capacity to park funds in medium-term investments has become increasingly constrained.
A danger signal is flashing from the bid-to-cover ratio—the measure of investor appetite in overall sovereign debt (SBN) auctions. In a healthy market, this figure typically sits above two, meaning investor demand far outweighs the government’s financing needs. However, recently, this ratio has continued to slide, from 2.29 in January 2026 to a mere 1.49 by March, far below last year’s average of over three.
The declining bid-to-cover ratio indicates tighter room for the government to borrow. The market is increasingly cautious about buying government bonds, foreseeing risks from a surge in budget deficit due to a myriad of President Prabowo Subianto’s high-cost populist projects. This concern is reflected in Indonesia’s credit rating outlook, which Moody’s and Fitch have downgraded to negative.
The impact is evident in investment composition. Foreign investors have recently been net sellers of rupiah-denominated government bonds. Consequently, foreign ownership has shriveled to approximately 12.9 percent—the lowest in recent years—amid the government’s massive financing needs this year. The total fund required amounts to Rp1,650 trillion, consisting of Rp832 trillion to cover the budget deficit and Rp820 trillion to repay maturing debts.
If investor interest continues to flag, the pressure on state financing will only intensify. Finance Minister Purbaya Yudhi Sadewa may claim that the national economic foundations remain rock-solid, but in the end, the financial markets always serve as the final arbiter of the credibility of the government’s measures.