JAKARTA : Indonesia's central bank said a plan to sell billions of dollars worth of bonds bought during the pandemic would be conducted carefully, after analysts warned the move could spark debt outflows and complicate an agreement with fiscal authorities.
Deputy Governor Dody Budi Waluyo told Reuters on Friday the decision should be seen as"a stronger signal" that BI wanted to mitigate inflation and exchange rate risks, even as it held off lifting interest rates from pandemic-era levels - which has made it among the world's least hawkish central banks.
"Increasing bond yields might attract new investors, as the yields will create an attractive entry level, but they might also increase the sell-off from existing investors," Handy Yunianto, Bank Mandiri's fixed income analyst, said. Demand at government bond auctions has been weak in the past few months and, if it falls further, BI may be forced to buy more bonds this year in its capacity as standby buyer, instead of selling, Mandiri's Yunianto said.