Indonesian 10-Year Yields Drop to Two-Week Low; Rupiah Advances
Indonesian bonds rose, pushing 10- year yields to the lowest level in more than two weeks, and the rupiah gained after global funds boosted holdings of local debt.
Overseas investors increased ownership of the securities by 1.68 trillion rupiah ($175 million) last week through Sept. 6, the biggest inflow since the five days ended Aug. 3, Finance Ministry data show. The cost to protect Indonesian notes from default dropped to the least since March. The European Central Bank agreed to an unlimited bond-purchase program last week to tackle the debt crisis, while the U.S. economy added fewer jobs than forecast in August, spurring speculation the Federal Reserve will announce more stimulus measures.
“Indonesia’s risk lessened along with improving global conditions, increasing appetite for local assets such as bonds and the rupiah,” said Nurul Eti Nurbaeti, the Jakarta-based head of treasury research at PT Bank Negara Indonesia. “The disappointing jobs report from the U.S. increased expectations for Fed stimulus, while we see progress in Europe.”
The yield on the government’s 7 percent securities due May 2022 fell three basis points, or 0.03 percentage point, to 5.98 percent, the lowest level since Aug. 23, according to closing prices from the Inter Dealer Market Association.
Five-year credit-default swaps declined 29 basis points last week to 152, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent if a government or company fails to adhere to its debt agreements. A basis point equals $1,000 annually to protect $10 million of debt.
The rupiah strengthened 0.2 percent to 9,572 per dollar as of 4:26 p.m. in Jakarta, prices from local banks compiled by Bloomberg show. One-month implied volatility, which measures exchange-rate swings used to price options, fell 15 basis points to 5.85 percent.
To contact the reporter on this story: Yudith Ho in Jakarta at email@example.com