Indonesia’s Bond Yields Decline to 10-Month Low on Fed Stimulus

Indonesia’s bonds rose, pushing the 10-year yield to the least since February, after the Federal Reserve expanded its asset-purchase program, boosting the prospect of inflows into emerging markets.

The rupiah advanced by the most in more than two weeks after the Fed said yesterday it will start buying $45 billion of Treasuries each month from January. Global funds added 3.35 trillion rupiah ($348 million) to their local-currency bond holdings this month through Dec. 11, according to data from the Finance Ministry. The yield on Indonesia’s 10-year notes was 5.27 percent today, the highest in Asia after India.

“The Fed announcement increased investor appetite for high-yielding assets like Indonesia’s,” said Raditya Ariwibowo, a Jakarta-based research analyst in the treasury division at PT Bank Negara Indonesia. “The rupiah will still be weighed down by demand for dollars from importers, while being supported by the central bank.”

The yield on the government’s 7 percent securities maturing in May 2022 dropped five basis points, or 0.05 percentage point, to 5.27 percent, the lowest level since Feb. 22, prices from the Inter Dealer Market Association show.

The rupiah strengthened 0.5 percent to 9,638 per dollar as of 4:06 p.m. in Jakarta, the biggest gain since Nov. 26, prices from local banks compiled by Bloomberg show. The currency touched 9,733 on Dec. 10, the lowest level since September 2009.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell 61 basis points to 5.14 percent.

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