Overseas interest in Indonesian bonds is gathering pace thanks to recent credit rating improvements, and Japan’s Daiwa SB Investments Ltd. is thinking of setting up a Japan-based fund to deal with demand. Indonesia’s high yield on ten-year local currency bonds (8.19%) compared to similar regional debt are a big attraction: Philippines’ are 7.4%, Thailand’s 3.4% and Singapore’s 2.22%. With Japan’s yen-denominated notes at 1.095%, it’s no wonder its investors are looking for something more enticing.

Japanese trusts have poured 142.5 billion yen (US$1.64 billion) into Indonesia in Q2 2010, a 12% increase on the previous three months and making it the fourth largest overseas destination after Hong Kong, Singapore and India, according to Japan’s Investment Trusts Association. The Indonesian finance ministry says foreign investors now hold a record 168 trillion rupiah ($18.6 billion) of its bonds, a 56% increase on the end of 2009.

source & article: Bloomberg