Bank Indonesia Can Reshape the Bond Yield Curve Without Touching the BI Rate. Here's How 'Operation Twist' Works
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6 min read
On 22 and 23 September 2026, Bank Indonesia held its benchmark BI Rate at 5.75%, unchanged, in the first policy meeting run by Acting Governor Destry Damayanti. If that were the only number you tracked, you would assume nothing else moved that week. But Indonesia's 10-year government bond was still yielding close to 7%, more than a full percentage point above the BI Rate, and Bank Indonesia has spent years quietly pulling that gap using a tool called Operation Twist, one that never touches the policy rate at all. Once you see how it works, a lot of movement in Indonesia's bond yields stops looking random.
Operation Twist is not an Indonesian invention. The name comes from a 1961 program by the US Federal Reserve, under the incoming Kennedy administration, during a recession. The Fed sold short-term US Treasury bonds and used the proceeds to buy long-term ones. Selling short-term bonds pushed their yields up a little, which helped keep short-term US interest rates attractive enough that money would not rush out of the dollar. Buying long-term bonds pushed their yields down, which was meant to make long-term borrowing, for things like mortgages and business investment, cheaper. The two moves together "twisted" the shape of the yield curve, the line you get when you plot bond yields against how long each bond has left to maturity, without the Fed changing its overall policy stance.
The Fed revived the same idea on a much larger scale in 2011, announcing on 21 September 2011 a $400 billion program that sold shorter-maturity Treasuries and bought longer-maturity ones. Because the Fed paid for the long-term bonds with money raised from selling short-term ones, its total balance sheet did not grow, unlike quantitative easing, which does expand it. That is the core idea worth remembering: Operation Twist reshapes a yield curve's slope without changing the size of a central bank's balance sheet or its main policy rate.
Bank Indonesia adapted the same playbook for its own government bond (SBN, Surat Berharga Negara) holdings. In its version, Bank Indonesia sells short-tenor SBN it holds in the secondary market while buying medium and long-tenor SBN at the same time. Selling short-tenor bonds pushes their yields up, which makes short-term Indonesian debt more attractive to foreign investors looking for a quick, high-yielding place to park money, supporting demand for the rupiah in the process. Buying medium and long-tenor bonds pushes those yields down, which keeps the government's own long-term borrowing costs from climbing and is meant to support economic activity that depends on longer-term credit (OCBC Indonesia; CNBC Indonesia, reporting on the mechanism in August 2022).
Bank Indonesia's short-tenor side of this trade changed shape in 2023. On 24 August 2023, Bloomberg reported that Bank Indonesia would introduce a new instrument, SRBI (Sekuritas Rupiah Bank Indonesia), to replace its existing reverse repo facility and to expand on what outright Operation Twist bond sales alone could do to lure foreign portfolio capital. Then-Governor Perry Warjiyo, in office at the time, described SRBI as a market-based tool built on Bank Indonesia's own SBN holdings as collateral. SRBI launched on 5 September 2023 and has since become Bank Indonesia's main weekly-auctioned lever for setting short-tenor yields, alongside, rather than instead of, its ongoing management of the longer end of the curve.
Bank Indonesia's own SRBI mechanics, tenors and past auction yields are covered in full in NetWort's explainer on SRBI. This post focuses on the broader curve-shaping tool that SRBI now sits inside, not on SRBI's own auction rules.
Since 8 June 2026, Bank Indonesia has published its own domestic money-market yield curve every Monday, covering the 1-month Repo rate and the 3, 6 and 12-month SRBI tenors, specifically to make this process more transparent to the public (Tempo). Because the data points below come from different release dates, they are labeled individually rather than compared as if they were measured on the same day:
| Rate | Level | As of |
|---|---|---|
| BI Rate (policy rate) | 5.75% | 22 to 23 Sep 2026 RDG |
| Repo, 1 month | 6.36% | 5 Jun 2026 |
| SRBI, 3 months | 6.62% | 5 Jun 2026 |
| SRBI, 12 months | ~7.00% to 7.08% | 28 Aug 2026 auction |
| SBN, 10 years | ~7.0% to 7.15% | Sep 2026 |
The 12-month SRBI yield eased from a 7.37% to 7.45% range in mid-August 2026 down to roughly 7.00% to 7.08% at the 28 August 2026 auction. Indonesia's 10-year SBN yield, meanwhile, has held in a similar 7.0% to 7.15% band through September 2026. With the short end and the long end sitting this close together, right now the curve looks unusually flat rather than sharply twisted. That lines up with what NetWort's own explainer on Indonesia's 2026 yield curve inversion already found: after briefly inverting in mid-2026, the curve normalized to a flat but not inverted shape, not a dramatic reshaping in either direction.
If you own a retail government bond (ORI or SBR) or a fixed-income mutual fund holding SBN, the yield quoted to you at issuance already reflects where Bank Indonesia has nudged that specific tenor. A short-tenor product issued while Bank Indonesia is actively supporting short yields will look more attractive on paper than it would in a period when Bank Indonesia is easing that same tenor down. None of this changes what the BI Rate itself is doing, which is exactly the point: the BI Rate can sit still for months while the actual yields you are quoted keep moving underneath it.
You can track the BI Rate, Indonesia's 10-year bond yield and the rupiah's exchange rate together, updated as fresh data comes in, on NetWort's Macro Context page, instead of waiting for the next headline to explain why they moved.