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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
INDONESIA
Bank Indonesia raised the 7-Day Reverse Repo Rate (BI7DRR) by 50bp in a "front-loaded, pre-emptive and forward-looking step," reaffirming its (recently acquired) hawkish credentials. The central bank said it will "continue buying/selling SBN in the secondary market to strengthen transmission of the BI7DRR by increasing the attractiveness of SBN yields for foreign portfolio investment inflows to strengthen exchange rate stabilisation measures."
- Operation Twist (OT) was launched in August, with the announcement plans to effectively swap short-dated government bonds for longer tenors via operations in the secondary market. The scheme serves as an additional rupiah stabiliser, on top of the traditional triple interventions.
- The outcomes of the implementation of Operation Twist have been questionable so far, at best. Admittedly, INDOGB 5-Year/10-Year yield spread has narrowed, but only by a small margin and in volatile moves. Interest-rate hikes and faster inflation also played a role in pushing short-end yields higher.
Fig. 1: Indonesia 5-Year/10-Year Yield Spread
Source: MNI - Market News/Bloomberg
- The scheme has failed to attract any substantial foreign inflows. The outstanding position of foreign players in Indonesian bonds keeps refreshing multi-year lows, while the total YtD outflow of foreign capital from government securities stands at $9.8664bn. Offshore players are offloading Indonesian debt as the traditional yield premium over U.S. securities has shrunk to record narrows.
Fig. 2: 5-Year vs. 10-Year INDOGB Yield Premium Over U.S. Tsys
Source: MNI - Market News/Bloomberg
- Speaking after the monetary policy review, Governor Warjiyo argued that "amid current global conditions, we need to be patient to see its effect."
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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