Calculating the Risk of a Tantrum
When the global market is in a rout, Indonesia’s Achilles heel lies in its government bonds market. The hardest shocks potentially start here. Foreign investor’s move to sell their Indonesian government bonds—“flight to safety” move—is the trigger.
HISTORY will repeat itself from eight years ago. Once upon a time, to overcome the crisis of 2008-2009, the Federal Reserve (the Fed) showered the market with liquidity. In 2013, seeing that the market was going back to normal, the Fed began to taper that liquidity injection. That policy immediately set off the global market into a tantrum. The term “taper tantrum” was born.
The market is currently anticipati...
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