However, it is not so much the case that foreign investors lost their confidence in the (economic) conditions of Indonesia (in other words: in Indonesian assets), but it is more that developments outside Indonesia are facilitating capital outflows.

One influential development is that the US 10-year treasury yield, a key measure of US long-term borrowing costs and as such closely watched as an indicator of broader investor confidence, has been rising toward 1.8 percent, touching its highest point since January 2020 (around the time when the COVID-19 crisis started).

Rising yields are caused by a sell-off in bond markets on expectations of stronger US economic growth and inflation in the period ahead as the ongoing US immunization program is expected to allow a major rebound in economic activity. Moreover, US President Joe Biden unveiled a USD $2 trillion infrastructure package at the start of April 2021 (partly financed by a higher corporate tax), which comes on top of a USD $1.9 trillion fiscal stimulus bill announced in March 2021.

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This update consists of 12 pages.

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