Positive Signals from the State Debt Security Market Came Slowly but Surely

Throughout May 2021, funds amounting to Rp34.71 trillion seeped out of rupiah-denominated Government Securities (SBN).

This SBN includes Government Islamic Securities (SBSN) or Sukuk and Government Bond (SUN).

Based on the category of buyers of rupiah SBN, Bank Indonesia was the one who reduced the most funds, namely Rp71.22 trillion, during May this year.

Citing data from the Ministry of Finance’s Directorate General of Budget Financing and Risk, as of May 31, 2021, Bank Indonesia funds in rupiah SBN amounted to Rp504.35 trillion or 11.99% of the total rupiah SBN funds. Apart from Bank Indonesia, mutual funds released Rp33.29 trillion and foreign investors released Rp8.1 trillion during May this year.

Meanwhile, conventional banks enter funds of around Rp44.9 trillion, followed by other investors of Rp30.41 trillion, as well as insurance and pension funds of Rp7.35 trillion. The portion of conventional bank ownership in rupiah SBN is 34.94%, dominant from other categories of investors.

The total outflow of rupiah SBN in May 2021 was greater compared to May of last year which amounted to Rp29.75 trillion. Last May, Bank Indonesia also became the investor who issued the largest fund from rupiah SBN, which was Rp16.84 trillion.

Meanwhile, conventional banks injected Rp28.13 trillion of funds in May 2020, followed by other parties of Rp7.1 trillion and foreign investors of Rp6.84 trillion. Foreign investors even seemed more confident in pouring money into rupiah SBN in May 2020 compared to May this year.

In terms of yields, in May 2020, the yield of Indonesian government bonds with a tenor of 10 years showed a strengthening trend, indicating rising prices which illustrates that there was still investor demand. If on May 1, 2020 the yield was at 8.01%, at the end of May the yield was at 7.435%.

This is different from the yield condition in May 2021 which looks volatile. World Government Bond data shows that from the beginning to mid-May 2021 the yield decreased up to May 11 at the position of 6.48%. Then, the yield ascended sharply to 6.59% on May 21 and fell back to 6.53% as of May 31.

Investment Conditions in Rupiah SBN in January-May 2021/2020

During the first five months of 2021, the inflow of funds into rupiah SBN reached Rp336.58 trillion. Thus, as of May 31, 2021, the total funds in rupiah SBN reached Rp4,207.34 trillion. Conventional banks inject the largest amount of funds of Rp 105.91 trillion, then followed by Bank Indonesia.

Meanwhile, mutual funds and foreign investors issued funds from rupiah SBN worth Rp33.09 trillion and Rp19.02 trillion, respectively.

Apparently, the inflow of funds into rupiah SBN in January-May 2021 is much greater than the inflow of funds in January-May 2020 which was only Rp298 trillion.

In the first five months of last year, around Rp131.46 trillion of foreign investor funds left rupiah SBN. The exit action was offset by the entry of conventional bank funds worth Rp327.69.

Foreign investors’ exiting funds were substantially lower in January-May 2021, at Rp19.02 trillion, contrasting to the same period last year which reached more than Rp130 trillion.

This suggests that, at least for the first 5 months of this year, foreign investors’ confidence in Indonesian debt securities was genuine, despite the COVID-19 outbreak.

The outflow of foreign funds in the first five months of 2020 can also be read from the sharp increase in yields in January-May 2020, from around 7.1% to 8.2%. Meanwhile, in January-May 2021 yields crawled up from the 6% range, broke to 6.8%, then dropped to 6.5%.

Returning to the inflow and outflow of funds in rupiah SBN, there are three categories of investors who persist in injecting their funds into rupiah SBN during January-May 2021 and January-May 2020.

They are insurance and pension funds, individuals, and others. These three categories of investors were also recorded to have purchased rupiah SBN during May 2021, also in May 2020.

Writer: Gloria Natalia Dolorosa