Bloomberg News

Indonesian Bonds Set for Longest Winning Streak Since December

February 21, 2013

Indonesia’s two-year bonds were set to advance for the third straight week, the longest winning streak since December, after global funds bought the nation’s debt. Rupiah forwards fell.

Foreign holdings of the nation’s securities are poised to rise for a sixth month, the longest stretch since July 2011, with overseas investors adding 6.26 trillion rupiah ($644 million) to their local-currency portfolio this month through Feb. 20, finance ministry data show. The economy expanded at the slowest pace in two years in the fourth quarter and its current- account gap widened to the largest on record since Bloomberg began compiling the data in 1989.

“There is excessive optimism from foreign funds, so there is still chance a for yields to head lower,” said Rully Nova, a currency analyst at PT Bank Himpunan Saudara 1906 in Jakarta. “The inflows may become a concern as they don’t fully reflect the fundamentals, considering slower growth and the current- account deficit last quarter, and faster inflation ahead.”

The yield on the government’s 11 percent bonds due October 2014 lost five basis points this week, or 0.05 percentage point, to 4.31 percent as of 8:50 a.m. in Jakarta, the lowest level since February 2012, prices from the Inter Dealer Market Association show. Benchmark two-year notes reached a record-low of 4.18 percent on Feb. 15, 2012. The yield was steady today.

The Finance Ministry’s sale of retail sukuk will end at midday, and allocations will be announced Feb. 25. The ministry is seeking to raise a record 15 trillion rupiah with bids amounting to 19 trillion rupiah so far, Dahlan Siamat, Islamic financing director at the debt management office, said by telephone from Jakarta yesterday.

Non-Deliverable Forwards

The rupiah’s one-month non-deliverable forwards slid 0.6 percent this week to 9,734 per dollar, the biggest drop since the five days ended Jan. 11, data compiled by Bloomberg show. They traded at a 0.2 percent discount to the spot rate, which weakened 0.5 percent to 9,716, prices from local banks show.

The forwards were steady today as the spot rate declined 0.1 percent. A daily fixing used to settle the derivative contracts was set at 9,703 yesterday by the Association of Banks in Singapore, compared with 9,681 on Feb. 15.

One-month implied volatility for the rupiah, which measures expected moves in exchange rates used to price options, was unchanged at 6.5 percent.

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

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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