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Jakarta Post

Drive stronger bargain in dollar bond market

  • Will Hickey
    Will Hickey

    ASEAN scholar at Guangdong University of Foreign Studies

PREMIUM
Jakarta   /   Thu, February 20, 2020   /  11:42 am
Drive stronger bargain in dollar bond market Finance Minister Sri Mulyani Indrawati gives a press statement on the performance of the 2018 State Budget at the Finance Ministry's office in Jakarta. (Antara/Sigid Kurniawan)

With recent political and social events like the coronavirus, low interest rates may go lower. Most sovereign bonds in the European Union are below or near zero; in the United States, they are barely above 1.5 percent. Yet, Indonesia continues to pay a large market premium for sovereign bonds in both rupiah and dollars. Paying more for only rupiah bonds would be understandable, but paying high premiums for US dollar denominated bonds, in a world awash with dollars due to overprinting or quantitative easing, is problematic. If Indonesia’s economy is as turbocharged as all the growth indicators show, there is no need to overpay on interest for bond subscriptions. Does Finance Minister Sri Mulyani Indrawati understand the concept of Berkeley economist Barry Eichengreen’s “original sin”? Namely, developing countries that cannot borrow abroad in their own currenc...

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.