JAKARTA – Bank Indonesia data shows that Indonesia’s 5-year Credit Default Swap (CDS) premium has surged by 51.1%, rising from 75.06 basis points (bps) on January 16, 2025 to 113.35 bps as of April 10, 2025.

According to bond market analysts, an increase in a country’s CDS premium reflects a perceived rise in its credit risk.

“This means the market sees a higher probability that the country may default on its debt,” the analyst stated.

The figure reported by Bank Indonesia on April 10 aligns closely with data from worldgovernmentbonds, which recorded Indonesia’s 5-year CDS at 116.21 bps as of April 14 2025.

Based on historical data from the same source (see chart), Indonesia’s CDS premium peaked at 239.11 bps on March 30, 2020, during the early stages of the COVID-19 outbreak.

As of April 14, 2025, the 5-year CDS premiums for BRICS countries are as follows:

  • Brazil: 210.58
  • Russia: 13,775.17
  • India: 84.08
  • China: 74.23
  • South Africa: 248.00

Bond market analysts explain that CDS functions similarly to an insurance premium—not for health or life, but against the risk of debt default.

In essence, if an investor holds bonds issued by a country and is concerned about the country’s ability to service its foreign currency debt (such as dollar-denominated bonds), the investor may purchase a CDS from a bank.

The CDS premium is the annual fee (typically expressed in basis points on the bond’s notional value) required for this protection.

For example, if an investor buys a 5-year CDS on Country X’s bonds worth USD 100 million at a premium of 150 bps (or 1.5% annually), they would pay USD 1.5 million per year. Should Country X default, the CDS seller (a bank or insurance provider) would compensate the loss as agreed. (MT/ZH)