The macroeconomic factors affecting government bond yield in Indonesia, Malaysia, Thailand, and the Philippines


Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

The government bond (GB) has become the most attractive investment portfolio option, even though many macroeconomic factors affect the bond yield. This paper aims to investigate the determining factor of local currency government bond yield by considering the inflation rate, credit default swap, stock market index, exchange rate, and volatility index. This study used 240 data panel from the Bloomberg stock market in the form of data panel covering Southeast developing countries, namely Indonesia, Thailand, Malaysia, and the Philippines, for five years or sixty months from January 2015 to December 2019. Data analysis used recursive models and multivariate regression techniques using EViews software. The random effect model results revealed that change in the foreign exchange rate and volatility indexes affected, partially and simultaneously, the changes in the stock market index. The result also showed that changes in the stock market index, inflation rate, and credit default swap affected, partially and simultaneously, government bond yield changes. These results suggest that the government bond yield could be managed by controlling volatility index, foreign exchange rate, stock market index, inflation rates, and credit default swaps. This finding could provide an insight into the policymaker and fiscal authority on managing the risk of government bonds under control during high volatility or even making it reasonably lower. This result could contribute to the current research in the field of financial management.

It is the author’s pleasure to thank Muhammad Aulia SE MSc CSA® from the Ministry of Finance of Republic Indonesia, for his invaluable contribution to encourage this study and also to share the data required for this paper. He also delivers essential insights into improving the quality of this work. This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

view full abstract hide full abstract
    • Figure 1. The GB as a percentage of GDP (2008–2019)
    • Figure 2. Government bond yield (10 years, 2015–2019)
    • Figure 3. Research model framework
    • Figure A1. Graph of inflation rates, foreign exchange rates, volatility index, credit default swap, and stock market index in Indonesia, Malaysia, Thailand, and the Philippines from January 2015 to December 2019
    • Table 1. Variable operationalization
    • Table 2. Cross-section random effects test equation for Model 1
    • Table 3. Cross-section test equation for the random effect for Model 2
    • Table 1B. Likelihood ratio result for redundant fixed test effects of Model 1 (Chow test)
    • Conceptualization
      Benny Budiawan Tjandrasa, Hotlan Siagian
    • Data curation
      Benny Budiawan Tjandrasa
    • Formal Analysis
      Benny Budiawan Tjandrasa, Hotlan Siagian, Ferry Jie
    • Investigation
      Benny Budiawan Tjandrasa, Hotlan Siagian
    • Methodology
      Benny Budiawan Tjandrasa, Hotlan Siagian
    • Writing – original draft
      Benny Budiawan Tjandrasa
    • Writing – review & editing
      Benny Budiawan Tjandrasa, Hotlan Siagian, Ferry Jie
    • Supervision
      Ferry Jie