Macro Strategy

Maturity vs Yield: The Reinvestment Effect

 

• Large SBN maturities support lower yields, but sustained declines require favorable global and domestic rate conditions.
• SRBI maturities do not ensure liquidity, as monetary operations, issuance strategy, and pricing remain drivers of yields.
• Tighter liquidity is increasingly evident as credit outpaces funding and wider IndONIA spreads signal funding pressure.

 

Can Large Maturities in Sep-26 Push Yields Lower? Domestic bond yields have remained elevated despite sizeable foreign inflows of IDR29.2tn over the past two months, suggesting that stronger demand alone has not been sufficient to push yields lower. In today’s report, we assess whether the upcoming maturity profile could become a key driver of lower yields. September 2026 will see around IDR190tn of SBN maturities, the largest single-month redemption on record and above the previous peak of IDR178tn in Jun-25. We expect this sizeable maturity wall to generate meaningful reinvestment demand for INDOGBs, as redemption proceeds are typically recycled back into the bond market. Historical episodes suggest the impact on yields tends to be more visible when large maturities coincide with supportive domestic liquidity and a favorable global rates backdrop. The are 2 main findings in our study:

Large maturities have historically helped push yields lower through reinvestment demand. Among the 10 largest monthly SBN maturities since 2020, the five largest completed episodes were followed by an average 3bp decline in yields in the following month, compared with a 4bp increase across the smaller episodes. More recent large-maturity episodes, however, have shown a stronger impact on yields. In Jun-25 and May-23, maturities of IDR178tn and IDR153tn were followed by yield declines of 18bp and 12bp, respectively. Jul-21 showed a similar pattern, with IDR128tn of maturity followed by a 14bp decline. This suggests that larger redemption proceeds can create stronger reinvestment demand which consequently support for lower INDOGB yields trajectory.

The impact is much stronger when the broader rates environment is supportive. Across large-maturity episodes since 2020, INDOGB yields declined in all seven cases when both the UST 10Y yield and BI Rate were flat or lower over the preceding three months. On average, yields fell 23bp from one month before to one month after maturity. This indicates that reinvestment demand is more effective as an amplifier than as a standalone driver. Large maturities can strengthen downward yield momentum when global and domestic rates are stable or easing but provide less support when broader macro pressures are pushing yields higher.

 

As such, September’s IDR190tn maturity should therefore provide sizeable support for lower yields, although the Fed remains the key external risk. The upcoming redemption exceeds the previous peak of IDR178tn in Jun-25, when INDOGB yields declined 11bp heading into the maturity month and a further 18bp afterward. However, September has also emerged as an important point for the global rate outlook. Markets had previously viewed September as the most likely timing for another Fed rate hike, before expectations shifted back toward a hold after nonfarm payrolls unexpectedly declined by 23,000. The Fed policy path will therefore remain crucial for INDOGBs, particularly as BI has historically responded to Fed tightening with further BI Rate increases, either immediately or in subsequent months. Hence, the IDR190tn redemption should support lower yields, but a sustained decline will likely require both the Fed and domestic rate outlooks to remain favorable.

 

SRBI: Large Maturities, Limited Liquidity Impact. After assessing how large SBN maturities can support lower yields, we now turn to SRBI, where the liquidity impact of maturities is less straightforward. Unlike SBNs, large SRBI redemptions do not necessarily inject additional liquidity into the market, as BI can offset them through new issuance. This reflects SRBI’s role as a monetary policy instrument, used to manage domestic liquidity and, in part, support rupiah stability through attracting portfolio inflows. Such situation has become increasingly visible in recent months as seen in Jul-26, whereby IDR114tn of maturities was fully replaced by IDR116tn of new issuance. In the past 3 months, net issuance remained positive at IDR20tn in May, IDR95tn in June, and IDR2tn in July. This marks a clear shift from much of 2025, when maturities generally exceeded new issuance. Therefore, headline maturity figures alone provide an incomplete picture of liquidity conditions, as the actual liquidity impact ultimately depends on how aggressively BI replaces the maturing instruments.

 

Unlike SBNs, however, we find limited evidence that net SRBI liquidity has a meaningful influence on SRBI yields. This reflects the instrument’s different function. SRBI is primarily a monetary operation tool, meaning its yield is more closely determined by BI’s policy stance and the pricing required to attract funds than by reinvestment flows. In other words, higher maturities may release liquidity temporarily, but subsequent issuance and BI’s desired pricing remain more important for SRBI yield direction.

 

Investor composition further shows that SRBI demand remains anchored by domestic banks, with foreign participation more sensitive to issuance volume and yield attractiveness. SRBI outstanding rose from IDR980tn in May-26 to a record IDR1,073tn in Jun-26 as BI sharply increased issuance. Foreign holdings accounted for much of the increase, rising IDR77tn MoM to IDR293tn, whereas bank holdings declined IDR62tn to IDR616tn. This pattern reversed in July as issuance normalized. SRBI outstanding eased to IDR1,059tn, foreign holdings fell IDR6tn to IDR287tn, and bank holdings increased IDR6tn to IDR622tn.

 

The pattern suggests that foreign demand tends to strengthen when BI issues SRBI more aggressively and offers sufficiently attractive yields, but becomes less reliable once issuance moderates. Domestic banks therefore remain the core source of structural demand, making BI’s issuance strategy and pricing more important than headline maturities in determining both SRBI liquidity and yields.

 

Liquidity Tailwind Continues to Moderate. The ample liquidity conditions seen in late-2025 have continued to fade, with banking liquidity already thinning before BI’s May–Jun rate hikes. Entering 2H26, continued liquidity absorption by BI, together with stronger credit deployment relative to funding growth, points to tighter banking liquidity and persistently elevated funding costs.

 

1. SRBI operations have continued to absorb liquidity despite large maturities. As discussed earlier, sizeable SRBI maturities have not translated into sustained liquidity injections because BI has continued to recycle maturing funds through new issuance. This was particularly evident in 2Q26, when issuance reached IDR155.5tn in Apr, IDR112.5tn in May, and IDR162.5tn in Jun, exceeding maturities of IDR30.8tn, IDR90.5tn, and IDR69.8tn, respectively. As a result, SRBI operations remained a source of net liquidity absorption, adding further pressure to banking liquidity entering 2H26.

 

2. Banking liquidity had already started thinning as loan growth increasingly outpaced deposit growth. Excess liquidity declined steadily from an average of around IDR348.6tn in Dec-25 to IDR243.9tn in Apr and IDR206.3tn in Jun-26, meaning the deterioration had already begun before BI completed its May–Jun rate hikes. At the same time, banks deployed more liquidity into credit. During 1H26, total loans increased by IDR468.0tn, nearly twice the IDR249.6tn increase in TPF. Loan growth accelerated from 9.3% YoY in Dec-25 to 12.1% in Jun-26, whereas TPF growth slowed from 10.9% to 8.1%, consequently pushing LDR higher. If this gap persists in 2H26, banks’ liquidity buffers could narrow further and eventually limit the pace of credit expansion.

 

3. Interbank pricing confirms that liquidity conditions have become tighter. The price of short-term liquidity is now pointing in the same direction. The average IndONIA–BI Rate spread remained deeply negative through early 2026, at -62bps in Dec-25 and around -64bps in Mar-26, before turning positive to +13bps in Jun and +37bps in Jul. This reversal is notable because BI also raised its policy rate in May–Jun. IndONIA not only adjusted higher with the BI Rate, but increasingly traded above it. Combined with the decline in excess liquidity, the positive spread indicates that the ample interbank liquidity conditions seen at end-2025 have clearly moderated. If sustained, tighter money-market conditions could keep banks’ marginal funding costs elevated.

 

4. The decline in liquidity appears to reflect stronger credit absorption rather than a shift into high-yielding securities. Importantly, the thinning liquidity buffer does not appear to be driven by banks materially increasing exposure to SRBI or SBN. Bank SRBI holdings rose only modestly from IDR589.4tn in Dec-25 to IDR615.7tn in Jun and IDR621.6tn in Jul. At the same time, banks’ share of total SRBI fell from 81% to 57% in Jun and 59% in Jul as other investors absorbed more of the expanding supply. Bank SBN exposure moved in the opposite direction, declining from around IDR1,329.0tn, or 20% of tradable IDR SBN, at end-2025 to monthly averages of around IDR1,181.1tn, or 17%, in Jun and IDR1,159.5tn, or 17%, in Jul. Overall, the evidence suggests that tighter banking liquidity in 1H26 was driven primarily by stronger credit deployment and BI’s liquidity absorption, rather than banks reallocating incremental funds into higher-yielding financial assets.

 

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