Bank Indonesia increased its secondary-market government-bond purchases in September to add liquidity to the financial system. The central bank bought nearly Rp300 trillion, or $16.8 billion, of government securities in primary and secondary markets through the end of the month. Monetary-management head Erwin Gunawan Hutapea disclosed the figures at a 30 September media briefing.
The total includes short-dated treasury bills bought in the primary market and longer-tenor bonds acquired in the secondary market. Purchases increased by more than Rp110 trillion from the Rp188.7 trillion reported on 21 July. Bank Indonesia has not published the monthly purchase volume in its recent policy statements.
LIQUIDITY TOOLS BROADEN
Hutapea described the bond operations as part of a wider effort to maintain adequate market liquidity. Bank Indonesia has also lengthened repo maturities from around one week to as much as 12 months and continued using foreign-exchange swaps. IDN Times reported that aggregate liquidity expansion across instruments exceeded Rp800 trillion.
The measures are intended to keep money-market rates near the 5.75% policy rate while preserving room to manage the rupiah. Hutapea said the overnight IndONIA rate was around 5.71%. Yields on Bank Indonesia rupiah securities had fallen to about 6.76% at the latest auction from roughly 7.74% previously.
BOND BUYING BALANCES MARKET PRESSURES
Bond purchases can offset the domestic-liquidity impact of foreign-exchange intervention while supporting financial-system funding conditions. The September increase followed a period of currency pressure and policy tightening. Bank Indonesia raised its policy rate by a cumulative 100 basis points in May and June.
The next test will be whether the central bank resumes regular disclosure of purchase volumes in policy communications. Investors will also watch secondary-market holdings, repo usage and money-market rates for signs that the liquidity push is changing pace. Clearer official data would make the balance between currency support and domestic liquidity easier to assess.