Meanwhile, the entrance of Indonesian bonds in Bloomberg's Global Aggregate Index will also have a positive impact on the image (confidence in) and competitiveness of Indonesian bonds as the index covers investment-grade bonds.

Starting per early May 2018, 50 rupiah-denominated government bonds will join the Global Aggregate Index and Global Treasury (with ticker code INDOGB and INDOIS). Together, these 50 bonds have a market value of USD $151.3 billion (per 31 January 2018). Per 1 June 2018 these Indonesian bonds will start to contribute to the index return.

Danny Suwanapruti, research analyst at the Goldman Sachs Group Inc, believes the entrance of Indonesian bonds in the index could result in between USD $4 - $5 billion worth of fresh additional capital inflows into Indonesia's debt market as fund managers will be encouraged to add these bonds to their portfolios. He added that Indonesian government bonds are more attractive compared to their Chinese counterparts because it is much easier to invest in Indonesian bonds than in Chinese bonds.

Bank Indonesia Governor Agus Martowardojo is even more optimistic and says capital inflows into Indonesia's debt market may grow up to USD $7 billion as a consequence of Indonesia entering the Bloomberg Barclay's Global Aggregate Index.

However, currently foreign ownership of Indonesian bonds is already quite high at around 40 percent (of Indonesia's IDR 2,341 trillion - approx. USD $172 billion - of outstanding rupiah-denominated government bonds). Considering the listing in the index makes Indonesian bonds more attractive, this foreign ownership ratio is estimated to rise further. The danger of this situation is that in times of global turmoil Indonesia may be plagued by a higher degree of capital outflows. To anticipate capital outflows the Indonesian government put in place the bond stabilization framework several years ago. This is a program in which government securities are bought through the State Budget or by state-owned enterprises in an attempt to support Indonesian securities in times turmoil and capital outflows.

Bloomberg Barclay's Global Aggregate Index currently consists of global bonds in 25 currencies. In the Asia-Pacific region, bonds in the following nations are included in the index: Japan, Australia, Hong Kong, Malaysia, New Zealand, Singapore, South Korea and Thailand.