Indonesian Bonds, Rupiah Drop as S&P Keeps Rating Below Moody’s

Indonesia’s rupiah and bonds fell, pushing 10-year yields to snap a three-day decline, after Standard & Poor’s kept the nation’s rating unchanged.

S&P maintained its assessment of Indonesia’s sovereign debt at BB+, one step below investment grade, it said in a statement today. The rating agency said the country’s plan to lure investment is at risk from “policy slippages” such as the administration’s failure to reduce fuel subsidies. The nation is rated investment grade at Moody’s Investors Service and Fitch Ratings.

“S&P’s delay in upgrading Indonesia resulted in downward pressure for the rupiah and the bond market,” said Putu Andi Wijaya, a Jakarta-based foreign-exchange dealer at PT Bank Rakyat Indonesia. “There was expectation that S&P would follow in the footsteps of Moody’s and Fitch.”

The yield on the 7 percent bonds due May 2022 climbed one basis point, or 0.01 percentage point, to 5.90 percent, according to closing prices from the Inter Dealer Market Association. The yield fell four basis points this month.

The rupiah dropped 0.1 percent to 9,188 per dollar as of 4:34 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The currency has declined 0.3 percent this month. One-month implied volatility, which measures exchange-rate swings used to price options, was unchanged at 6.5 percent for a third day.

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

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.