Indonesia draws US$9B into central bank bills, sovereign bonds YTD

Jakarta (ANTARA) - Recent interest rate hikes have driven approximately US$9 billion in foreign portfolio inflows into Indonesia’s central bank securities and government bonds this year, a senior monetary official said Monday.

Bank Indonesia (BI) Senior Deputy Governor Destry Damayanti announced that foreign capital flowing into BI Rupiah Securities (SRBI) and sovereign bonds (SBN) accelerated heavily between January and June 26, with June logging a substantial share of the momentum.

"There has been a fairly significant inflow during June," Damayanti told a joint press conference with legislative leaders in Jakarta. "Year-to-date... inflows into our SBN and SRBI portfolio have reached around US$9 billion."

The central bank aggressively raised its benchmark interest rate by a cumulative 100 basis points across May and June to 5.75 percent.

This aggressive tightening triggered a structural repricing of domestic fixed-income assets, widening yield differentials to lure global offshore capital back into Southeast Asia’s largest economy amid high-for-longer U.S. Federal Reserve rates.

Damayanti defended the rate hikes as a critical, short-term stabilization play designed to anchor the volatile rupiah and insulate the domestic financial ecosystem from heightened global macroeconomic uncertainty.

"The confidence of offshore investors will, of course, also be reflected in confidence among the Indonesian public," Damayanti added.

To prevent a liquidity crunch in money and foreign exchange markets following the hikes, the central bank expanded its net monetary operations injections to roughly 1,000 trillion rupiah by the end of June, up from 600 trillion rupiah a month prior.

According to central bank data, foreign fund managers held 238.09 trillion rupiah, or 23.3 percent, of the 1,021.13 trillion rupiah in total outstanding SRBI as of June 15.

At a primary auction on June 26, weighted average accepted yields for the central bank bills stood at 7.36 percent for six-month tranches, 7.54 percent for nine-month notes, and 7.70 percent for the 12-month benchmark.

Translator: Rizka Khaerunnisa, Kuntum Khaira

Editor: Aditya Eko Sigit Wicaksono

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