Bank Indonesia Rupiah Securities to be introduced to stabilize Rupiah

  • New certificates being introduced by Bank Indonesia for sale next month are expected to offer “very attractive” yields for foreign investors. This is to generate inflows to help keep liquidity supportive for economic growth.
  • The central bank announced that it would hold twice weekly auctions of Bank Indonesia Rupiah Securities (SRBI), using BI’s holdings of government bonds as underlying assets
  • BI would auction 6-, 9- and 12-month certificates every Wednesday and Friday and they would carry similar returns to rates offered for reverse repurchase (RR) of government bonds.,
  • The instrument was intended to attract capital inflows as well as mop-up excess rupiah liquidity in the domestic financial market, and provide some stability for the rupiah currency at a time when Indonesia’s current account and balance of payments have swung into deficit.
  • Edi Susianto, Bank Indonesia’s (BI) head of monetary management declined to provide guidance on how much SRBI the central bank would sell, but said domestic liquidity would be kept “not too tight”, but would be supportive for economic growth, without being excessive.
  • The SRBI would replace BI’s “Operation Twist” in the bond market, where the central bank had been selling its short-term government bonds and vowing to buy long-term bonds whenever yields rise. BI would also stop offering RR of government bonds with similar tenures.

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