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Central Bank Policy A Key to Rupiah Stability.

INDONESIA CENTRAL BANK


  • Shorter dated bonds are now playing a major role in monetary policy in Indonesia.
  • Bank Indonesia in late 2023 started issuing short dated IDR denominated securities, known as SRBI.
  • Bank Indonesia also started issuing short dated USD denominated securities, known as SVBI and a sharia compliant (sukuk) version SUVBI.
  • The success in issuing SVBI and SUVBI has seen investors, seeking more appealing short term interest rates relative to USD deposit rates in banks, supporting their issuance.
  • Shorter dated IDR denominated issuance has reduced dramatically over this period creating a pricing differential between SRBI and shorter dated government bonds.
  • Some market observers argue that this pricing disparity is a risk to the demand for Indonesian Government bonds, yet this seems to be missing the point.
  • The issuance of these shorter dated securities has been instrumental in the Central Bank’s management of the currency, making the Rupiah one of the most stable currencies of it’s peers this year.
  • A stable currency, long been Indonesia’s goal, far outweighs any concern of potential issues this short dated issuance may create for the longer term demand for government bonds.
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