Indonesia’s 10-year bonds rose, pushing the yield to the lowest level in almost two weeks, before a meeting today at which the central bank is forecast to leave borrowing costs unchanged. Rupiah forwards weakened.
Bank Indonesia will keep its policy rate at 7.25 percent, according to 17 of 18 economists surveyed by Bloomberg. One sees a 25-basis-point increase. The monetary authority has raised the reference rate by 1.5 percentage points since mid-June as it seeks to narrow the current-account deficit from a record in the second quarter. The trade balance swung to a surplus in August after recording the largest-ever shortfall in July.
“The country needs to continue curbing the current-account deficit and monetary tightening would be useful, but we are not expecting a rate hike,” said Irene Cheung, a foreign-exchange strategist at Australia and New Zealand Banking Group Ltd. in Singapore. “The market has priced in the positive trade data.”
The yield on the government’s 5.625 percent bonds due May 2023 declined one basis point to 8.1 percent, the lowest level since Sept. 25, as of 9:48 a.m. in Jakarta, according to prices from the Inter Dealer Market Association. The yield has fallen 41 basis points this month.
Rupiah one-month non-deliverable forwards weakened 0.4 percent to 11,365 per dollar, the biggest drop since Sept. 30, data compiled by Bloomberg show. The contracts traded 1.5 percent stronger than the onshore spot rate, which declined 0.1 percent to 11,540 per dollar, prices from local banks show.
A daily fixing used to settle the contracts was set at 11,209 per dollar yesterday, according to the Association of Banks in Singapore. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 14 basis points, or 0.14 percentage point, to 15.56 percent, data compiled by Bloomberg show.
Foreign-currency reserves climbed for a second month to $95.7 billion in September, from $93 billion the previous month, the central bank said in a statement late yesterday. That pared the loss this year to 15 percent.
The yield on the government’s 9.5 percent bonds due June 2015 climbed four basis points to 7.08 percent, according to prices from the Inter Dealer Market Association. Indonesia plans to offer 8 trillion rupiah ($693 million) of local-currency debt today.
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