Indonesian onshore note issuances by non-financial corporates are likely to exceed 65 trillion rupiah (US$3.9 billion) in 2024, compared with 60 trillion rupiah last year, amid continued capital expenditures and refinancing needs.

“We expect Indonesian corporates’ average funding cost and local bond coupons to increase in 2024, following a series of benchmark rate hikes since October 2023,” Fitch Ratings says in a non-rating action commentary.

Domestic bond coupons have been more elastic to policy rate hikes than bank loan interest rates. The high coupons demanded by investors have also led some issuers to reduce issuance amounts.

The rating agency expects the shorter-tenor trend to persist, after the average tenor fell to three years, the shortest since 2018.

Payment defaults on domestic issuances are likely to ease this year, with medium-term notes dominating missed payments in the first half.

Negative sentiment from the debt restructurings of PT Waskita Karya (Persero) and PT Wijaya Karya (Persero) may curtail the ability of other state builders to raise local bonds, Fitch says, although wider contagion beyond the sector should be limited.