BI Boss Gives Reason For SRBI Interest Rate Higher Than SBN

JAKARTA - Bank Indonesia (BI) revealed that the reasons for the Bank Indonesia Rupiah Securities (SRBI) interest rate were higher than the results of Government Securities (SBN).

Bank Indonesia (BI) Governor Perry Warjiyo said that he deliberately released higher SRBI yields to reduce pressure on the United States (US) dollar. Because, in the first quarter of 2024 there was an anomaly in the United States (US) debt securities market. Yield, which was given by the US Treasury Note with a tenor of 2 years higher than the 10-year US Treasury bond yield.

At that time, the yield given by the US Treasury note reached 4.7 percent while the US Treasury bond reached 4.4 percent. The impact of this anomaly is the occurrence of outflows or foreign capital flows out of SBN of US$1.82 billion in the first quarter of 2024.

Meanwhile, the US Treasury note is influenced by the US reference interest rate or the Fed fund rate which lasts at the level of 5.25 percent to 5.5 percent. Meanwhile, the US Treasury bond is influenced by the amount of US debt. The SRBI yield is associated with the US Treasury note.

"To prevent capital outflows, why is the SRBI interest rate higher than SBN? Because indeed the US Treasury Note 2 years is higher than the bond (US Treasury Bond tenor 10 years). And also to avoid exchange rates so we sell more SRBI and the SRBI interest rate is higher," Perry said at the KSSK III Periodic Meeting Results Press Conference in 2024, Friday, August 02.

Perry said that higher SRBI Yield succeeded in preventing capital outflows from Indonesia. When the capital outflow was US$1.82 billion from the SBN market in the first quarter of 2024, there was capital inflow (foreign funds) to SRBI of 1.29 billion US dollars in the first quarter of 2024 and 6.8 billion US dollars in the second quarter of 2024.

"We convey that the APBN policy does not yet need to increase sales or the auction of SBN. It is not necessary. Because there is no need, so why are we coordinating for this, we encourage SRBI to help stabilize the exchange rate," Perry said.

In the future, Perry explained that the US Treasury Note yield will decrease along with the US benchmark flower cut, and at the same time the US Treasury bond yield will increase, and eventually it will make SRBI yields decrease.

SRBI yields will fall in the fourth quarter of 2024. Maybe the yield will be the same as SBN. It is possible that the number of SRBI auctions will be lower in number. Once the SBN auction is higher, we will lower the SRBI auction. We will coordinate closely between the government and BI," he explained.

For information, the SRBI interest rate for tenors 6, 9, and 12 months dated July 12, 2024 was recorded at the level of 7.30 percent, 7.39 percent, and 7.43 percent, respectively. Meanwhile, the yields from SBN tenors 2 and 10 years as of July 16, 2024 were 6.68 percent and 6.95 percent, respectively.