Global Uncertainty Casts Shadow, SUN Yield Rises

Government bond yields (Surat Utang Negara/SUN) have shown an upward trend since the beginning of the year. The possibility of the US Federal Reserve (The Fed) raising its benchmark interest rate up to three times by the end of the year has created uncertainty in the global financial market.

According to Bloomberg data, the benchmark 10-year SUN yield closed at 7.376% at the end of last week, up 106 basis points (bps) from its position of 6.319% on December 29, 2017. Indeed, at the beginning of this week, the government bond yield had already reached 7.457%. Similarly, the 5-year SUN yield rose 117 bps to 7.028% from its year-end position of 5.863%, and further increased to 7.044% in today's trading. The rise in SUN yields will increase the financing costs of the State Budget sourced from government bonds.

The increase in SUN yields has caused the IBPA composite bond index to shrink by 2.33% to 237.32 by the end of last week, from its position at the end of December 2017. The total return index for government bonds fell by 2.71% to 258.96. Meanwhile, the total return index for corporate bonds still recorded an increase of 0.1% to 253.3.