Indonesian 15-Year Bond Yield Drops to Two-Week Low on Inflation

Indonesia’s bonds rose, pushing the 15-year yield to a two-week low, on speculation the central bank will refrain from increasing interest rates after inflation unexpectedly slowed.

Annual consumer-price gains declined to 4.31 percent last month from 4.58 percent in August, compared with the 4.6 percent pace predicted by economists in a Bloomberg survey. Bank Indonesia will meet next week to decide on its benchmark rate, unchanged for a seventh month in September. The Finance Ministry plans to raise 5 trillion rupiah ($521 million) from a debt auction today, after the previous sale on Sept. 25 drew bids that exceeded the amount offered by 2.4 times.

“We expect rates to hold steady considering the lower- than-expected inflation last month,” said Dini Anggraeni, a fixed-income analyst at PT Mandiri Sekuritas in Jakarta, a unit of the nation’s largest lender by assets. “Demand at the auction will be moderate, with a higher bid-to-cover ratio than the previous auction.”

The yield on the government’s 7 percent bonds maturing in May 2027 declined one basis point, or 0.01 percentage point, to 6.30 percent as of 3:46 p.m. in Jakarta, the lowest level since Sept. 19, prices from the Inter Dealer Market Association show.

The rupiah weakened 0.1 percent to 9,598 per dollar, the biggest drop since Sept. 26, prices from local banks compiled by Bloomberg show. One-month implied volatility, which measures exchange-rate swings used to price options, held at 6 percent.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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