Indonesia's Credit Default Swap Increases, Signaling Investors Doubt

Economic conditions that are still shrouded in a downward trend and domestic political situation that tends to be unstable, as shown in rallies that ended in riots in several regions in Indonesia, have exacerbated investors’ perceptions over Indonesia’s investment risk. It was reflected in the rising of Indonesia’s credit default swap (CDS). On Tuesday (9/24), a ten-year tenor CDS rose 556 basis points (bps) to 159.41, even though the CDS level was still at 147.40 last week. Meanwhile, the five-year tenor CDS rose 15.97 percent to 89.45 on Thursday (9/26), even though it was still at 77.1 last week.

Indonesia's CDS had dropped after the general election ended as there was hope that political situation would stabilize and the economy could return to normal. However, recent events and the weakening of Indonesia’s economic data as well as a projected low economic growth from the World Bank increased the CDS level again. Although it is still far from the highest level of 219.25 in the past year, the rising trend of CDS is quite alarming.