Global Pressure Eases, Bond Yields Potentially Decline
Yield on government bonds
Bankate economist David Sumual said the yield on government bonds (SUN) has the potential to decline as global pressure eases. The decline in external turmoil is in line with the projections of the central bank of the United States (US), The Federal Reserve, which will not hoist its benchmark interest rate this year.
“The decline is in line with other equivalent country yields. The movement is the same,” he told Candirs on Monday (3/25).
The decline in SUN yields shows rising prices. This reflects the attractiveness of investors in government debt securities. If the yield falls, the burden of financing government debt will be reduced as well.
According to David, the decline in government bond yields in developing countries was in line with the decline in US government bond yields , US Treasury. Referring to tradingeconomics , US Treasury yields fell 0.16% in the week to 2.46%. Meanwhile, Indonesian bond yields were at 7.6%, down 0.21% in the week.
The decline is the largest compared to countries in the Southeast Asia region. The second highest decline was Thailand and Hong Kong, which were 0.10% in one week. Thailand bond yields currently at the level of 2.46% and 1.66% Hong Kong.
In addition to the decline in yields, he also estimated the volatility of the rupiah currency to be below 10% so far this year. Because, the decline in global pressure could push the inflow of foreign funds which would support the strengthening of the rupiah.
The inflow of foreign funds is currently mostly happening on SBN and stocks. On SBN, the funds reached Rp. 8.38 trillion for a month to March 20. Based on RTI data, foreign investors posted a net buy of Rp. 90.69 billion this month.
However, he estimates, global uncertainty will increase again in the second semester. “Oil prices determine,” he said. Uncertainty about trade war and Brexit is expected to subside in the next two months.
In line with David, Economist at the Center of Reform on Economics (Core) Piter Abdullah Redjalam said bond yields could potentially decline along with high SUN demand. If the flow of foreign capital continues to enter, then the demand for SUN will be high.
“Prices will automatically go up and yields will fall,” he said, adding that the rupiah volatility could be below 10% due to the support of inflows of foreign funds.