Bank Indonesia’s 25% Stake in Bond Market Fuels Liquidity Fears
- Central bank owns about 25% of sovereign debt outstanding
- BI bond buying helps to contain volatility, T. Rowe Price says
The Bank Indonesia headquarters in Jakarta.
Photographer: Rosa Panggabean/BloombergThis article is for subscribers only.
Investors in Indonesia are growing increasingly wary about potential stress in the nation’s bond markets as the central bank ramps up debt holdings to record levels.
Bank Indonesia now owns about 25% of the country’s outstanding bonds, up from just 5% before the pandemic, amid a buying binge driven by its efforts to protect the rupiah. Central banks routinely buy government debt to suppress yields and bolster growth, but the scale of BI’s purchases are reminiscent of those made by the Bank of Japan that eventually drained the life out of the debt market.