Bloomberg News

Indonesia Bonds Drop Before Rate Review This Week; Rupiah Gains

April 09, 2012

Indonesia’s bonds fell, sending yields to the highest in almost two weeks, on speculation the central bank will hold interest rates when it meets this week. The rupiah advanced.

Bank Indonesia will leave the benchmark reference rate at 5.75 percent on April 12 after cutting it by 25 basis points in February, according to Goldman Sachs Group Inc. and Oversea- Chinese Banking Corp. Consumer prices rose 3.97 percent in March from a year earlier, the first acceleration in seven months, the Central Bureau of Statistics said last week.

“Bonds aren’t very attractive now given accelerating inflation,” said Aris Setiawan, a Jakarta-based foreign- exchange trader at PT Rabobank Internasional Indonesia. “Bank Indonesia won’t cut or raise interest rates this week.”

The yield on the government’s 7 percent bonds due May 2022 rose three basis points, or 0.03 percentage point, to 5.95 percent as of 4:02 p.m. in Jakarta, according to closing prices from the Inter-Dealer Market Association. That was the highest level since March 27.

The rupiah gained 0.1 percent to 9,150 per dollar, according to prices from local banks compiled by Bloomberg.

The currency’s one-month implied volatility, which measures exchange-rate swings used to price options, climbed 25 basis points to a one-week high of 7 percent. The measure reached 6.50 percent on April 3, the lowest level since Sept. 9.

To contact the reporters on this story: Yudith Ho in Singapore at yho35@bloomberg.net.

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


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