Indonesia Five-Year Bond Yield Nears March Low on Lack of Supply

Indonesian sovereign bonds rallied, pushing the yield on the five-year notes to near an eight-month low, after foreign funds boosted holdings to a record due to a lack of supply of new securities. The rupiah declined.

Overseas investors added 17.6 trillion rupiah ($1.8 billion) to their local-currency sovereign debt portfolios this month, taking ownership to 267.9 trillion rupiah on Nov. 27, finance ministry data show. The government will offer 1 trillion rupiah of six-month and one-year bills on Dec. 3, the last auction this year, it said in a statement yesterday. It canceled a Nov. 27 sale and bought 500 billion rupiah of notes from the secondary market this week.

“We can see bonds rallying further until the end of the year after the sale,” said Raditya Ariwibowo, a research analyst in the treasury division at PT Bank Negara Indonesia in Jakarta. “The government may conduct more debt switches and buybacks in order to support the market.”

The yield on the 10 percent securities maturing in July 2017 declined one basis point, or 0.01 percentage point, to 5.034 percent as of 9:02 a.m. in Jakarta, prices from the Inter Dealer Market Association show. The yield reached 5.025 percent on Nov. 19, the lowest level since March 6.

Foreign funds have pulled $40 million from Indonesia stocks this week, taking monthly net sales to $366 million, exchange data show.

The rupiah weakened 0.1 percent to 9,608 per dollar, prices from local banks compiled by Bloomberg show. One-month implied volatility, a measure of expected moves in exchange rates used to price options, was steady at 4.40 percent, the lowest level since August 2008.

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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