0 Indonesian Two-Year Bond Yield Drops to 11-Month Low on Inflows

Indonesia’s government bonds rose, pushing the two-year yield to the lowest level since February 2012, after overseas investors bought the notes on optimism a rupiah slide is drawing to an end. The currency is poised for its 11th monthly loss of the past year. Global funds added Rp 1.43 trillion ($147 million) to their local-currency sovereign debt holdings this month through Jan. 29, finance ministry data show. The rupiah’s one-month implied volatility, which measures expected moves in exchange rates used to price options, was unchanged for a sixth day at 6.25 percent, the lowest level since Jan. 9. 

“Pressure on the rupiah has receded, which builds confidence especially for foreign investors seeking to buy local bonds,” said Herdi Wibowo, head of debt capital markets in Jakarta at BCA Sekuritas, a unit of the nation’s largest bank by market value. “The notes have room to rally further on more capital inflows.” The yield on the 11 percent sovereign debt due October 2014 dropped three basis points, or 0.03 percentage point, to 4.35 percent as of 9:30 a.m. in Jakarta, according to prices from the Inter Dealer Market Association. Indonesia’s benchmark two-year yield fell 13 basis points in January, poised for a fifth monthly decline. 

The rupiah’s one-month non-deliverable forwards slid 0.3 percent today to 9,840 per dollar, according to data compiled by Bloomberg. That’s 1.4 percent weaker than the spot rate, which declined 0.3 percent to 9,699, prices from local banks show. A daily fixing used to settle the derivative contracts was set at 9,790 yesterday by the Association of Banks in Singapore. The rupiah’s onshore spot rate fell 0.6 percent in January, following a 5.9 percent loss in 2012, and the forwards weakened 0.2 percent. Indonesia will start hedging interest payments on overseas debt against currency swings this year to prevent the budget deficit from widening beyond estimates, Bambang Brodjonegoro, head of fiscal policy, told reporters in Jakarta yesterday.

Bloomberg
source : the jakarta post