Indonesia c.bank buys 6.5 trillion rupiah of local bonds after Trump jolt

An employee walks past a mock one thousand rupiah coin on display at Bank Indonesia's headquarters in Jakarta, Indonesia April 21, 2016. REUTERS/Darren Whiteside/File Photo

SINGAPORE: Indonesia’s central bank bought 6.5 trillion rupiah (RM2.14bil) in Indonesian government bonds in the secondary market to temper market volatility after the US presidential election, its deputy governor said on Tuesday.

Bank Indonesia bought a portion of the Indonesian government bonds that foreign investors sold in the wake of the US presidential election on Nov 8, deputy governor Perry Warjiyo said in an interview with Thomson Reuters.

“We bought about 6.5 IDR trillion,” he said, adding that foreign investor outflows from Indonesia’s government bond market amounted to about 24 trillion rupiah (RM7.9bil) over that span.

Investors are aware that BI interventions occur when “volatility in the market is too excessive,” said Warjiyo, who was speaking at the sidelines of an emerging Asia economic event in Singapore.

Indonesian government bonds and the rupiah, along with other emerging market assets, have come under selling pressure over the past few weeks, as US bond yields jumped after Donald Trump’s upset win in this month’s election.

Expectations President-elect Trump’s policies will boost fiscal spending, economic growth and inflation have triggered a sharp rise in US bond yields and the dollar.

Warjiyo said the central bank won’t hesitate to intervene in cases when there is large market volatility.

“In most cases, we just let the market determine the exchange rate,” he said.

“But in certain cases like what we saw over the past two or three weeks, where volatilities were quite large, then we do not hesitate to intervene both in the FX market as well as purchasing bond from the secondary market.”

Warjiyo did not specify the amounts squared off in the foreign exchange interventions of the past few weeks. - Reuters