Indonesia's Government Bond Yield Spread Remains High

Indonesia's government bond yields remain the highest in the Asia-Pacific region, as shown in the graph below. According to Asiabondsonline data, the yield on Indonesian government bonds on April 13, 2018, was 6.59%, higher than the yield on Philippine government bonds at 6.1%. As a result, Indonesian debt yields remain attractive to investors.

Concerns about the US Federal Reserve raising interest rates more than three times this year have caused yields on several Asia-Pacific government bonds to rise. The highest yield increase was recorded for US government bonds at 43 basis points (bps) this year. This was followed by Philippine government bonds (40 bps), Singaporean bonds (36.6 bps), and Indonesian bonds (27.4 bps).

However, the improvement in Indonesia's debt rating will lead to a decline in government debt yields. On April 13, 2018, the international credit rating agency Moody's upgraded the Republic of Indonesia's Sovereign Credit Rating (SCR) to Baa2 with a stable outlook, from Baa3 previously. The resulting decrease in yields will make the cost of government bonds for financing the national budget cheaper.