In Asia’s high-yield bond battle, Indonesia set to gain upper hand over India

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Updated: February 12, 2019 6:57:23 AM

In contrast, Indonesia’s improving fiscal status and aggressive monetary policy stance in the face of global headwinds have burnished the nation’s assets in the eyes of investors.

In the battle between Asia’s two highest-yielding major bond markets, Indonesia once again appears poised to gain the upper hand over India. Global money managers are increasingly shunning Indian securities as the government hands out billions of dollars in tax cuts and subsidies to boost the prime minister’s appeal ahead of elections, blowing through the nation’s deficit target in the process. In contrast, Indonesia’s improving fiscal status and aggressive monetary policy stance in the face of global headwinds have burnished the nation’s assets in the eyes of investors.

Comparison between two of emerging Asia’s two biggest economies are common given their similarities, and that’s especially true this year. Both run current-account deficits, are highly sensitive to shifts in US interest-rate policy, and face key elections in 2019. “Indonesian bonds look more attractive given that yields are high, the economy is likely to do well and finances may be on a better relative positioning than India,” Manu George, Schroder Investment Management’s director of fixed income, said from Singapore.

Assets in both countries will be tested this week as India reports key inflation and factory output figures, while Indonesia releases trade data. The yield on India’s widely traded 2028 bonds surged 13 basis points on February 1, the day the Centre announced plans to sell a record Rs 7.1 lakh crore of securities to finance the fiscal deficit for the year beginning April 1. Not even a surprise interest-rate cut by the RBI last week has been able to fully stem the losses.

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