The yield on Indonesia’s 10-year government bonds dropped to a five-week low amid speculation the Bank of Japan’s monetary easing will increase fund inflows into emerging markets. The rupiah was little changed.
Global investors increased holdings of the nation’s debt by 7.5 trillion rupiah ($772 million) since April 3, the day before Japan’s central bank said it would buy 7.5 trillion yen ($75 billion) of bonds per month. The yen fell to a four-year low today, boosting returns on overseas investments for fund managers in Japan. Indonesia’s benchmark interest rate is 5.75 percent, the highest among Southeast Asia’s five biggest economies and more than Japan’s 0.1 percent.
“Investment into Indonesia’s government bonds is quite popular in Japan,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “The yields are relatively high in the region and the prospect of the yen’s depreciation is encouraging investment abroad among Japanese investors.”
The yield on the 5.625 percent debt due May 2023 fell one basis point, or 0.01 percentage point, to 5.44 percent as of 9:22 a.m. in Jakarta, the lowest level since March 13, according to data compiled by Bloomberg.
The rupiah traded at 9,715 per dollar, from last week’s close of 9,709, according to prices from local banks compiled by Bloomberg. That is a 0.1 percent premium to the currency’s one- month non-deliverable forwards, which declined 0.1 percent to 9,729 today, data compiled by Bloomberg show.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, slumped five basis points to 5.77 percent.
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