Indonesian Bonds Decline on S&P Rating, Inflation; Rupiah Steady

Indonesia’s bonds fell, lifting 10- year yields for a second day, after Standard & Poor’s held off from raising its debt rating and fuel-policy shifts fanned concern inflation will pick up.

S&P refrained from joining Moody’s Investors Service and Fitch Ratings in upgrading Indonesia to investment grade, citing “policy slippages” in a statement yesterday. The decision wasn’t expected by Bank Indonesia, Perry Warjiyo, director for economic and monetary policy research at the central bank, said yesterday. The monetary authority predicts consumer-price gains will reach 4.7 percent this year if sales of subsidized fuel are limited, compared with 3.97 percent in March, Warjiyo said. The rupiah was little changed.

“Investors are now taking a wait-and-see approach on Indonesian assets,” said Artanavaro Gasali, the Jakarta-based head of global markets at PT Bank ICBC Indonesia. “The domestic concern is still inflation.”

The yield on the government’s 7 percent bonds due May 2022 climbed one basis point, or 0.01 percentage point, to 5.92 percent, according to closing prices from the Inter Dealer Market Association.

The government plans to prohibit vehicles with an engine size equal to or greater than 1,500 cubic centimeters from buying subsidized fuel starting in May, Evita Legowo, director general of oil and gas at the energy ministry, said April 23. Policy makers backtracked on plans to raise fuel prices last month.

The rupiah traded at 9,195 per dollar as of 4:01 p.m. in Jakarta, after closing at 9,192 yesterday, according to prices from local banks compiled by Bloomberg.

One-month implied volatility, which measures exchange-rate swings used to price options, was unchanged at 6.5 percent for a fourth 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.

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