Carry Signals and Bond Returns in the Indonesian Government Bond Market

Carry strategies in developed markets are well studied, but their effectiveness in emerging government bond markets remains less well understood. This study analyzes cross-curve carry strategies in the Indonesian government bond market from June 2009 to June 2025. The findings indicate that a term spread-based carry long–short portfolio delivers positive returns and exhibits persistence across rolling 10-year horizons throughout the sample period. However, performance tends to weaken during episodes of local currency depreciation. Duration-matched long-only carry portfolios also outperform the market benchmark after transaction costs, indicating practical value for investors. Overall, the findings suggest that carry strategies can be effective in the Indonesian government bond market and that the term spread-based carry measure provides a more robust signal than the alternative specification that incorporates roll-down effects.