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Indonesian Bonds in Best Weekly Advance in 3 Months on Inflows

Indonesia’s bonds advanced this week, prompting the yield on eight-year notes to fall the most in almost three months, as foreign funds bought the securities on optimism the local currency has stabilized.

Overseas investors added 940 billion rupiah ($96 million) to their debt holdings last week, latest data from the finance ministry show. The currency’s one-month implied volatility, a measure of expected moves in exchange rates used to price options, declined to the lowest level since Jan. 9. Indonesian markets were closed for a holiday yesterday.

The yield on the 11 percent government bonds due November 2020 dropped three basis points, or 0.03 percentage point, from Jan. 23 to 5.14 percent as of 9:04 a.m. in Jakarta, the lowest level since Jan. 8, according to prices from the Inter Dealer Market Association. The yield dropped 12 basis points this week, the most since the five days ended Nov. 2.

“Shorter-term bonds have more room to rally as the yields remain attractive,” said Suriyanto Chang, head of treasury at PT Bank QNB Kesawan in Jakarta. “Confidence has returned after seeing the rupiah sustain near current levels as authorities intently guard its movements.”

The rupiah’s one-month non-deliverable forwards declined 0.4 percent from Jan. 23 to 9,790 per dollar, data compiled by Bloomberg show. That’s 1.5 percent cheaper than the spot rate, which dropped 0.1 percent to 9,643, prices from local banks compiled by Bloomberg show.

A daily fixing used to settle the derivative contracts was set at 9,759 yesterday by the Association of Banks in Singapore. The non-deliverable forwards gained 0.5 percent this week while the spot rate weakened 0.1 percent.

One-month implied volatility in the rupiah was unchanged at 6.25 percent today and 50 basis points lower than a week ago.

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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