JAKARTA – The Indonesian market bond expected to grow positively in 2021. The performance of bonds next year is in line with economic recovery. Which has started to improve since the second semester of 2020. Director & Chief Investment Officer, Fixed Income Manulife Aset Manajemen Indonesia, Ezra Nazula, explained that accommodative monetary and fiscal policies will be the main sentiment in the 2021 market.
“These policies need to support the economic recovery process,” Ezra said in an official statement, Monday (21/12).
In addition, growth in the bond market 2021. It Will also be supported by the return of foreign capital flows to emerging markets. Foreign investors are looking for yields or potential growth in developing country financial assets amid low inflation and global central bank interest rates.
The US Dollar Continues to Weaken Against the Indonesian Rupiah
On the other hand. The weakening trend in the US dollar will continue in 2021 due to accommodative US monetary and fiscal policies. Meanwhile, the fundamentals of the Rupiah remain good with low inflation, room for lower interest rates, and the flow of foreign funds that have begun to return, increasing the attractiveness of Indonesian bonds even though yields have fallen in 2020.
Ezra estimates that local investor demand for bonds will remain supportive in 2021. Due to abundant market liquidity amid accommodative fiscal and monetary policies. While credit growth was still relatively low.
“Vaccine availability and distribution will be a market concern which can be a catalyst for the market, but also a risk factor,” Ezra said.
Ezra said the above factors are supportive factors for the Indonesian bond market in 2021. Indonesian bonds still offer attractive real yields among other developing countries.
As an illustration, the real yield on Indonesian 10-year bonds is currently in the range of 4.6 percent. While the Philippines is -0.5 percent and India -1.7 percent, which makes it a high attraction for Indonesian bonds.
“With these global and domestic dynamics, we project that the yield on 10-year government bonds could potentially fall to the level of 5.5 – 6.0 percent in 2021. Thus providing an upside potential for investment in the bond market,” Ezra concluded.
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