Indonesia's 10-year government bond yield climbed to a four-year high of 7.54% on Tuesday, extending its yearly increase to over 140 basis points. The rupiah weakened toward a record low, hovering just 0.2% away from its all-time trough. MSCI Inc.'s threat of a stocks downgrade and persistently high oil prices weighed heavily on investor sentiment, triggering a 2% tumble in the benchmark stock index.
Analysts note that while the yield approaches fair-value ranges, risk-off sentiment and elevated commodity costs continue to pressure public finances. Despite the volatility, foreign investors added $509 million to sovereign bond holdings this month, attracted by relatively high real returns in the region. The market has turned volatile again in October after months of reprieve following MSCI's potential reclassification plans.
Still, the yield alone has yet to draw stronger global inflows given prevailing negative sentiment.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing