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Tight monetary policy, capital exodus jitter Indonesia's bond market
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Every banknote counts: A teller counts United States dollar banknotes at Bank Mandiri’s cash pooling in Jakarta on June 23. The greenback has been strengthening against the world’s currencies, including the rupiah. (Antara/Muhammad Adimaja)
I
nvestors are holding back from the government bond market amid rising interest rates to fend off high inflation in many major economies, leaving emerging countries like Indonesia struggling to keep up with investors’ appetite to secure capital at home.
Bids have been slowing down in Indonesian bonds auctions in the past weeks, analysts from securities and banks noted. On Oct. 11, it reached a multi-year low of Rp 15 trillion (US$961.8 million), Reuters wrote.
Meanwhile, foreign ownerships on government securities have massively tanked to around 14 percent as of Oct. 20, almost a third of pre-pandemic level at around 39 percent, according to a Finance Ministry report.
The trend was in line with the soaring yield of the United States Treasury that achieved a decades-high of 4 percent mark from around 1.4 percent earlier this year, following multiple rates hike by the Federal Reserve (Fed) to 3.25 percent from the past months, with more possible hikes in the future.
“The auctions’ results have shown that we are facing global uncertainties. Many investors set their position to wait and see with reduced appetite to enter the auctions,” Finance Ministry Financing Department head Luky Affirman told reporters on Oct. 21 during a monthly briefing.
Read also: G20 finance chiefs agree to help debt-distressed countries
Indonesian 10-year local-currency government-bond yield has continued to rise in response to higher yields from major economies, hitting 7.64 percent as of Oct. 24, Asian Development Bank data show, whereas in roughly the same period last year, it was just slightly above 6 percent.
