Confidence in the Indonesian bond market continues to show improvement

Confidence in the Indonesian bond market continues to show improvement. This was driven by the 5-year CDS decline in Indonesia, which on May 18, 2020 was below 200bps. In addition, foreign investors also appear to have begun to enter the Indonesian bond market, which is reflected in an increase in foreign ownership by IDR 12 trillion to IDR 929 trillion on May 20, 2020 from its lowest level at IDR 917 trillion on May 12, 2020. Since May 12, Government bond yields decreased by 64bps and 62bps for 5-year and 10-year bond yields to 6.75% and 7.33% on May 26, 2020.

The Federal Reserve has already unleashed a barrage of new policies to keep the economy out of depression. Investors reckon it’s lining up another one. The Fed’s version of the strategy known as yield-curve control is expected to involve capping yields on government bonds of a chosen maturity -– by buying however much it takes. For central banks that already cut short-term interest rates to zero, it’s a way to signal that they’ll stay low for an extended period while helping pin down longer-term borrowing costs too. (Bloomberg)


Source: Danareksa Sekuritas Debt Research

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