Bloomberg News

Indonesia’s Bonds Advance on Central Bank Buying; Rupiah Drops

December 09, 2011

Dec. 9 (Bloomberg) -- Indonesia’s government bonds advanced for a second week as overseas investors boosted holdings of the nation’s assets on optimism the central bank is buying the securities. The rupiah fell.

Bank Indonesia is committed to buying government bonds in the secondary market, Perry Warjiyo, director for economic research and monetary policy, said Nov. 29. Foreign holdings of government debt increased to 215.98 trillion rupiah ($23.7 billion) on Dec. 5, from 214.9 trillion at the end of last week, according to finance ministry data.

“The central bank has acknowledged buying the government bonds,” said Radhika Rao, an economist at Forecast Pte in Singapore. “Bank Indonesia has been in the market and it has managed to keep the rupiah somewhat steady.”

The yield on benchmark 8.25 percent notes due July 2021 fell 11 basis points, or 0.11 percentage point, this week to 6.17 percent today, according to midday prices from the Inter- Dealer Market Association. The rate was unchanged today.

Bank Indonesia kept its benchmark interest rate at 6 percent yesterday, a decision predicted by 17 of 22 economists surveyed by Bloomberg. Five forecast a quarter-percentage-point cut.

The currency fell today as the MSCI Asia-Pacific Index of regional shares dropped after French President Nicolas Sarkozy said British Prime Minister David Cameron made “unacceptable” demands regarding treaty amendments.

The rupiah dropped 0.4 percent this week to 9,090 per dollar as of 3:40 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. It declined 0.3 percent today and touched 9,240 on Nov. 29, the weakest level since June 2010.

--Editors: Greg Ahlstrand

To contact the reporter on this story: Khalid Qayum in Singapore at kqayum@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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