ISAS Insights

India’s local-currency bond yields are at 8.21 per cent, an all-time high. Yields rise if there is increase in supply of Government paper, indicating that Government is borrowing more—a sign of fiscal stress. Inflation risks and monetary stance affect yields, with lower inflation indicating higher bond prices and lower yields. In Asia, yields on Indonesian paper used to be very high, but are now around 6 per cent, based on better macro-economic management, a greater openness to the foreign exchange markets and lower inflation. Moody’s now rates Indonesia as investment grade, S&P one notch below. By contrast, ratings for Indian debt have been falling over the last year.