Foreigners Hold Rp 781 Trillion in Indonesian Government Bonds

Indonesia's achievement of investment-grade status has led to a surge in foreign investor interest in government bonds. As of August 14, 2017, foreign investors held Rp 781.55 trillion (US$56.5 billion*) of Surat Utang Negara (SUN, or Indonesian government bonds), representing 39.31% of the total Rp 1,988.33 trillion (US$144.2 billion*). This represents an increase of Rp 6.02 trillion (US$435 million*) compared to the end of July.

Following the upgrade of Indonesia's sovereign debt rating to BBB- by Standard & Poor's Global Ratings on May 19, 2017, foreign ownership of SUN has increased by Rp 41 trillion (US$2.9 billion*). Consequently, foreign ownership has increased by more than Rp 115 trillion (US$8.3 billion*) since the beginning of the year. Continued economic growth above five percent, controlled inflation, and a stable Rupiah exchange rate will continue to attract foreign investors to the domestic financial market.

Indonesia's investment-grade status has also lowered the cost of Indonesian bonds. This is evident in the significant decline of the yield on Indonesian government bonds throughout 2017, falling by 106.5 basis points (bps) to 6.908%. Conversely, SUN prices have risen. The Government Bond Index (INDOBex Government Total Return) closed at 226.48 on August 15, a 10.18% increase from its year-end 2016 level of 205.549.

*Note: USD conversion rates are approximate and for illustrative purposes only. The exact conversion will vary depending on the date and exchange rate used.