Abstract
The purpose of this research is to examine and analyze the influence of inflation, BI rate, exchange rate, and foreign ownership on government bond yields. Research data is monthly data from 2010 to 2013. Purposive sampling is chosen as the sampling method in this research. Based on the determined criteria, 23 government bonds have fulfilled the sample criteria. The result of this research shows that inflation, BI rate, exchange rate, and foreign ownership simultaneously have a significant influence on government bond yields. Partially, inflation and BI rate have positive significant influence on government bond yield, while exchange rate and foreign ownership have negative significant influence on government bond yield. DOI: 10.5901/mjss.2015.v6n5s5p34
Highlights
Bond market is one of the financing source alternatives, both for the government and the corporations (Fabella and Madhur, 2003)
H1: Inflation has a positive influence on Government Bond yield All existing interest rates, including deposit interest and bond yield, will refer to BI rate with the adjustment on the maturity (Bank Indonesia, 2013)
H2: BI rate has a positive influence on Government Bond yield Bonds are sensitive to inflation rate, interest rate, as well as exchange rate (Indonesia Stock Exchange, 2014)
Summary
Bond market is one of the financing source alternatives, both for the government and the corporations (Fabella and Madhur, 2003). Closing the government deficit budget through the domestic loan is considered necessary for Indonesian government (Sihombing et al, 2012). The government conducts domestic financing through the issuance of government bonds or known as Government Securities. The government takes part in establishing and developing bond market in Indonesia (Sihombing et al, 2012). Government Debt Securities is one of Government Securities that is unconditionally issued by the government and considered as an instrument of portfolio investment for domestic and foreign investors. Government Debt Securities is one type of Government Bond with the largest value issued by Indonesian government for the national development purposes
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