Rupiah Strengthens, Composite Bond Index Closes at 327.93 (Tuesday, August 31st)

The depreciation of the US dollar against major world currencies allowed the Indonesian Rupiah to strengthen, approaching the Rp 14,000 per US dollar level. This strengthening was immediately responded to by bond market players who returned to buying bonds. As a result, bond prices, both government and corporate, rose again, although yields remained negative.

According to the Indonesian Securities Valuation (PHEI) website, the Indonesia Composite Bond Index (ICBI) closed up 0.7501 points (0.23%) to 327.9267 on Tuesday, August 31, 2021. This increase in the ICBI was the second this week.

Specifically, the INDOBeX Composite Clean Price closed up 0.2598 points (0.21%) to 121.2919. Meanwhile, the INDOBeX Effective Yield index fell 0.0309 points (0.53%) to 5.8135.

Meanwhile, the INDOBeX Government Total Return closed up 0.7771 points (0.24%) to 321.6718. Similarly, the INDOBeX Corporate Total Return also rose 0.2026 points (0.06%) to 357.2786.

Quoting Bloomberg, the Rupiah strengthened, closing up Rp 102.5 (0.71%) to 14,267.5/US dollar. The Federal Reserve (The Fed) Chairman, Jerome Powell's, lack of a clear timeline for asset reduction and interest rate hikes was positively received by market players.

The US dollar was pressured against major world currencies, with the US dollar index (DXY) correcting 0.132 points (0.14%) to 92.521 (as of 17:21 WIB). The Rupiah strengthened against the US dollar, approaching the Rp 14,000 per US dollar level.

With the strengthening Rupiah, bond investments in Indonesia become more attractive in terms of yield. For comparison, the yield on the benchmark government bond series FR0087 (10-year tenor) is 6.04%/year. Meanwhile, the yield on US government bonds (10-year tenor) is only 1.28% per year.

Similarly, the yield on UK government bonds (10-year tenor) is only 0.66% per year. Indeed, the yield on other government bonds is negative, meaning an investment in these bonds results in a loss.

Meanwhile, the Jakarta Composite Index (JCI) of the Indonesia Stock Exchange closed up slightly by 5.4 points (0.09%) to 6,150.3.