Bloomberg News

Indonesia 10-Year Yield Declines Most in Three Weeks on Inflows

February 24, 2013

Indonesia’s bonds rose, with the 10- year yield dropping the most in three weeks, after overseas investors added to holdings of the debt. Rupiah forwards fell.

Funds based abroad increased ownership of the securities by 6.3 trillion rupiah ($648 million) this month to 279 trillion rupiah as of Feb. 20, finance ministry data show. Average yields on the bonds dropped 10 basis points in February to 5.90 percent, according to HSBC Holdings Plc. That compares with rates of 4.28 percent on Philippine notes and 3.60 percent on Thai debt.

“Inflows are driven by investors chasing yields,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore. “It’s quite concerning as we think a 6 percent to 7 percent average yield would be more in line with fundamentals, though we don’t expect to see inflows drying up soon.”

The yield on the government’s 5.625 percent notes due May 2023 fell four basis points, or 0.04 percentage point, to 5.25 percent as of 9:04 a.m. in Jakarta, the biggest drop since Feb. 1, according to prices from the Inter Dealer Market Association.

Indonesia reports data on inflation and trade later this week. Consumer prices rose 4.57 percent in January from a year earlier, accelerating from 4.3 percent in December, official figures showed this month. That was more than the 4.28 percent average for 2012.

President Susilo Bambang Yudhoyono nominated Finance Minister Agus Martowardojo as his candidate to succeed Darmin Nasution as governor of the central bank when his term expires May 23, Speaker of the House Marzuki Alie said Feb. 23.

Rupiah one-month non-deliverable forwards declined 0.2 percent to 9,737 per dollar, data compiled by Bloomberg show. The contracts traded at a 0.3 percent discount to the spot rate, which held at 9,711, according to prices from local banks. A daily fixing used to settle the derivatives was set at 9,711 on Feb. 22 from 9,703 the previous day by the Association of Banks in Singapore, which publishes the rate at 11:30 a.m. each day

One-month implied volatility for the rupiah, which measures expected moves in the exchange rate used to price options, was unchanged at 6.50 percent.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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