Is the Yield Spread on Indonesian Government Bonds Still Attractive?

Indonesian government bonds remain attractive to both domestic and foreign investors. This is because the yield on Indonesian Government Securities (SUN) is currently above the benchmark interest rate and inflation. Meanwhile, several developed countries such as Japan and European countries have implemented negative interest rates, i.e., below zero percent.

According to Asiabondsonline data, the yield on Indonesian government bonds maturing in 10 years on Friday (September 29th) was at 6.55 percent. Meanwhile, the BI 7-day benchmark interest rate is 4.25 percent. Therefore, the yield on Indonesian SUNs has a spread of 230 basis points (bps) above the benchmark interest rate. This figure is the highest compared to seven other Asian countries. Furthermore, the current SUN yield also has a spread of 273 bps above inflation, which stands at 3.82 percent.

In contrast, the yields on Vietnamese and Chinese government bonds are already below the benchmark interest rates in those countries. The yield on Vietnamese government bonds is 5.57 percent, while the benchmark interest rate is 6.25 percent. Similarly, the yield on Chinese government bonds is only 3.78 percent, while the benchmark interest rate is 4.35 percent.