The Yield on the 10-Year Government Bonds has Increased by 18 bps to 6.9%

The yield on the 10-year Government Bonds has increased by 18 bps to 6.9% as of August 28, 2020 compared to previous week’s close. However, this increase is not in line with Indonesia’s 10-year CDS which tends to decline by 9 bps from 20 August 2020 to 164 bps on 27 August 2020. In addition, the Rupiah against USD showed an appreciation of 0.95%, from IDR 14,771 per USD on 21 August to IDR 14,632 per USD on 28 August 2020.

The Federal Reserve’s move to an extended era of low interest rates offers an opportunity for emerging economy central banks to do the same. While the impact will vary by country, lower for longer U.S. interest rates and a weaker dollar will boost emerging market assets and take pressure off monetary authorities to raise interest rates in order to protect their currencies or to attract foreign capital. Yet with several economies still saddled with high inflation and volatile currencies, there’s limited scope for developing markets to be as accommodative as the Fed. (Bloomberg)

Source: Danareksa Sekuritas Debt Research

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