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View all search resultsRI bond yield spikes on BI independence worries, uncertainty
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Behind the scenes: A woman walks past the logo of Bank Indonesia in Jakarta on Nov. 17, 2016.
(Reuters/Beawiharta)
T
he yield on Indonesian government bonds has climbed to its highest level in more than three months on the back of general uncertainty, fiscal worries and concerns about the independence of Bank Indonesia (BI) following the nomination of Thomas “Tommy” Djiwandono as deputy governor.
The country’s 10-year bond yield, a common proxy for investor confidence in an economy, rose to around 6.3 percent this week from levels around 6.1 percent maintained since early December, according to readings from Investing.com.
Syafruddin Karimi, an economics professor at Andalas University, attributed the 6.3 percent level reached on Monday, the day the news about Tommy’s nomination broke, to an increasing risk premium over concerns about BI’s independence.
“Bond investors punish the perception of [worsening] governance before any proof of intervention even materializes, because just a little doubt over monetary policy can indeed increase the risk premium,” he told The Jakarta Post on Thursday.
Tommy currently serves as a deputy finance minister and is the nephew of President Prabowo Subianto, who nominated him for the BI position, as is the sole prerogative of the President.
House of Representatives officials, along with Finance Minister Purbaya Yudhi Sadewa and BI Governor Perry Warjiyo, have insisted that his move to BI, which is deemed almost certain, will not affect the central bank’s independence.
Perry addressed the matter on Wednesday during BI’s monthly press conference announcing the benchmark interest rate, vowing continued professionalism and data-based decision-making at the central bank.
