Mutual Fund Portion in SBN Increases, MI Chooses 5-10 Year Tenor

Bisnis.com, JAKARTA – Investment managers managing mutual funds see the potential for the bond market to become stronger in the second half of this year. Government Securities (SBN) with a tenor of 5-10 years have also become the most popular favorites. Based on data from the Ministry of Finance's DJPPR as of June 12, 2025, the portion of mutual funds in tradable rupiah SBN increased by 4.19% ytd to IDR194.85 trillion from the initial position of IDR187 trillion. Meanwhile, the total ownership of non-bank investors reached IDR3,544.38 trillion. This amount has increased by 5.16% year-to-date from the position at the beginning of the year of IDR3,370.64 trillion. Bank ownership of SBN increased even higher by 13.99% ytd to IDR1,206.60 trillion. At the beginning of the year, bank ownership was recorded at only IDR1,058.50 trillion.

BNI Asset Management CIO Farash Farich said the increase in the portion of mutual fund ownership reflected the increasing interest of institutional investors in the bond market amidst still attractive yield conditions. "Positive sentiment is also supported by the trend of global monetary easing, such as interest rate cuts by the ECB and RBI, as well as expectations that the Fed will begin to open up space for interest rate cuts in the second half of this year," Farash told Bisnis, Thursday (6/19/2025).

He said the loose monetary policy encouraged the creation of foreign capital inflows into the global financial market, including to emerging market countries such as Indonesia.

Meanwhile, the yield on 10-year government bonds, which is currently in the range of 6.74%, is expected to rally further to 6.4% if macroeconomic conditions are maintained and foreign investor inflows continue.

Farash sees the current SUN valuation as competitive against peer countries with the same rating, so the domestic bond market will be attractive until the end of the year.

With these conditions, BNI AM is said to prefer short tenors to the bell curve, namely bonds with a tenor of 5 to 10 years. Bonds with this tenor are more in demand because there is a decrease in the secondary Minimum Reserve Requirement (GWM) ratio from 5% to 4%, effective June 2025. The policy, which is part of Bank Indonesia's steps to loosen banking liquidity, is estimated to increase liquidity by up to IDR 78.45 trillion.

Not to mention, there are bonds series FR0081 which mature with an outstanding value of around IDR 142.2 trillion and SRBI maturity of around IDR 134 trillion. Farash also sees that with this liquid market position, there is potential for banks to make re-investments or bond replacements, especially in medium tenors.

"The bull steepening trend that occurred in the domestic bond market, where short-term yields fell more significantly than long-term yields, also supports the overweight strategy in short to medium tenors which currently offer optimal yields with relatively lower duration risks," explained Farash.

Head of Investments PT Eastspring Investments Indonesia Liew Kong Qian sees the same thing, with BI's continued interest rate cuts potentially creating a steepening bull curve that tends to benefit portfolios with a focus on short-term bonds.

"[Eastspring Indonesia's] investment strategy with a balanced allocation with a long position on the 5-10 year tenor, as well as a tactical approach on the long tenor for optimal performance," said Liew.

However, Liew sees a volatility challenge in the bond market towards the end of the year, although it is more controlled than the stock market. He said uncertainty related to Trump's tariff policy, geopolitical pressures, and US labor and inflation data could impact US Treasury yields. Meanwhile, the Fed tends to take a wait and see position.

Meanwhile, domestically, BI lowered its GDP projection to 4.6-5.4% in line with weakening domestic demand at the beginning of the year and suboptimal fiscal absorption.

"This makes the need for state financing (SUN issuance) tend to be lower than the initial estimate. The balance between domestic growth and inflation supports the opportunity for further interest rate easing, which can support the bond market," Liew said.

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