Indonesia’s corporate bond risk gauge has surged to a six-year high, with yield premiums over regional peers jumping 28 basis points to 67 basis points. The spike follows MSCI Inc.’s warning that it may reclassify Indonesia from emerging-market to standalone status, raising concerns about governance and policy credibility under President Prabowo Subianto. The move has triggered a broader selloff in Indonesian assets, with bank-issued Additional Tier 1 notes falling sharply.
State-controlled Bank Mandiri’s AT1 bond has dropped 3 points since the announcement, while Bank Negara Indonesia’s equivalent has declined for six consecutive days. Despite the turmoil, senior debt remains stable near 99 cents on the dollar. Analysts note that larger banks maintain strong capital buffers, but uncertainty persists until MSCI delivers its final decision by June 30, 2027.
The central bank has also cut reserve requirements to free up over $10 billion for lending, aiming to cushion economic growth against tightening pressures.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing