(May 28): Southeast Asia’s two biggest economies are selling more short-term debt to cope with the stress from the US-Iran war, draining liquidity from broader markets.
Indonesia’s central bank has stepped up issuance of rupiah bills to attract foreign inflows to support the rupiah, which has hit record lows and become Asia’s worst-performing currency this quarter. In Thailand, the government is leaning more on short-term notes as it pushes ahead with a controversial emergency borrowing plan.
The preference for shorter-dated securities comes as inflation concerns fuelled by the energy shock have spurred a selloff in longer-maturity sovereign bonds globally. While the shift would give the two Southeast Asian nations greater funding flexibility, it could also raise refinancing risks over time, according to analysts.
“As investors are buying these short-term debt instruments, the demand for long-term bonds is decreasing to some extent,” said Chandresh Jain, rates and FX strategist at BNP Paribas in Singapore.
Bank Indonesia’s total outstanding rupiah bills, known as SRBI, climbed by 126.7 trillion rupiah (US$7.1 billion or $9.1 billion) last month, the most in nearly two years. The rupiah weakened about 2% against the dollar in April in its worst performance since October 2024. SRBIs have maturities ranging up to 12 months.
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The 12-month SRBI yield rose to 6.76% at the most recent auction on May 22, the highest since January 2025, and above Indonesia’s 2-year government bond yield of around 6.53%.
“We think the market now prefers to buy SRBI instead of Indonesian government bonds,” said Jain. They offer yields similar to Indonesian government bonds without exposing investors to “significant duration risk”.
In Thailand, the new government is seeking to contain the fallout from the Middle East conflict, which has disrupted trade and tourism — two of the economy’s main engines. Prime Minister Anutin Charnvirakul’s administration this month approved a relief package that includes cash handouts and subsidies, part of its 400 billion baht (US$12 billion or $15.67 billion) crisis borrowing plan.
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The nation plans to raise about US$5 billion ($6.4 billion) through a mix of promissory notes and term loans to fund a raft of measures to ease living costs, Jindarat Viriyataveekul, director-general of the Public Debt Management Office, said in an interview Tuesday.
Additional borrowing for the 2026 fiscal year is likely to come through promissory notes and bills instead of government bonds, Citigroup Inc strategists including Gordon Goh wrote in a note earlier in May. These shorter-dated securities should sap overall demand for government bonds, they added.
The amount of outstanding promissory notes stood at about 1.16 trillion baht at the end of March, near the highest since early 2023, according to the latest central bank data compiled by Bloomberg. The nation’s long-end bonds have already been sold off on fiscal and inflation concerns, with the spread between the two- and 10-year yield rising to about 110 basis points last week, the widest since November 2022.
“As the Thailand bond curve is steep, the government would like to keep interest costs low” by relying more on short-term instruments such as term loans and promissory notes, BNP’s Jain added.
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