Foreign investors notched their longest selling stretch of Indonesian debt in 10 months as a surge in US Treasury yields made investors turn away from assets in the emerging market.
(Bloomberg) — Foreign investors notched their longest selling stretch of Indonesian debt in 10 months as a surge in US Treasury yields made investors turn away from assets in the emerging market.
Global funds sold a net $323.9 million of Indonesian bonds on Aug. 23, a sixth straight day of selling, according to finance ministry data released Monday.
Strong economic fundamentals made Indonesia debt the most sought-after trade in the region this year. But bets of a more hawkish Federal Reserve have made global funds pull out $487 million from the local debt this month. The gap between Indonesia’s 10-year bond yield and US debt of the same maturity is near a record low at 2.27 percentage points.
“Narrower nominal yield spreads do increase the sensitivity of foreign flows to a hawkish Fed narrative,” which are probably entering a consolidation phase for now, said Winson Phoon, head of fixed income research at Malayan Banking Berhad in Singapore. “The relative appeal of short term rupiah bonds doesn’t look as clear cut as earlier this year.”
The outflows are a growing concern for Indonesia’s central bank, which last week said it would issue new instruments to attract flows and shore up the rupiah. The currency has dropped 1.3% against the greenback this month, trading near its five-month low.
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