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Govt bonds still worthwhile investment option despite lower yields: Analysts
Government bond yields have fallen further over the past few days to hit the lowest point since the end of the first quarter, but analysts say the debt obligations remain an option worth considering for low-risk investors.
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More than 850 Indonesian issuers (or guarantors) had issued global bonds as of Aug. 31, 2019. (Courtesy of Freepik)
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ields on Indonesian government bonds have continued a downtrend over the past few days, hitting their lowest point since the end of the first quarter, but analysts say the debt obligations remain an investment option worth considering.
The yield on 10-year government bonds was 6.29 percent on Tuesday, down more than 61.2 basis points (bps) from a year earlier, but up 20.3 bps year to date (ytd), according to worldgovernmentbonds.com.
Anugerah Sekuritas Indonesia associate director of fixed income Ramdhan Ario Maruto said the drop in the government bond yield followed a global market trend, as the “externality factor” had abated in market perception.
“Today, [the yield on the 10-year bond] is below 6.3 percent. This decline is expected to continue,” Ramdhan told The Jakarta Post on Tuesday.
The trend, he said, was partly the effect of a rise in domestic demand for bonds, especially from retail investors. The recent SBR 010 issuance attracted more than Rp 7.5 trillion in subscriptions, far above the Rp 5 trillion target.
Read also: Indonesia raises record high $1.27b from retail bonds sale
Demand was further increased by the fact that banks had moved funds into government bonds following Bank Indonesia’s decision to keep the benchmark rate at a record low of 3.5 percent. Moreover, banks were unable to disburse more credit as business activity had slowed, held back by restrictions imposed to rein in the COVID-19 pandemic, according to Ramdhan.
