Indonesia’s two-year bond yield is headed a fifth straight weekly drop as investors favor shorter- dated debt after inflation accelerated to a 20-month high.
Consumer prices climbed 5.31 percent in February, a March 1 government report showed, the quickest pace since June 2011 and more than the 4.81 percent median estimate in a Bloomberg survey. Bank Indonesia kept interest rates unchanged for a 13th consecutive meeting yesterday, as predicted by all 21 economists in a separate survey.
“Given the recent inflation pressures, a lot of investors are shortening duration to the shorter end of the curve,” said Ezra Nazula, head of fixed income at PT Manulife Asset Management Indonesia in Jakarta. “If inflation still picks up, and the government needs to increase the overnight rate, there will definitely be some pressure on the short-end bonds.”
The yield on the government’s 11 percent debt due October 2014 fell two basis points, or 0.02 percentage point, this week and today to 4.27 percent as of 9:06 a.m. in Jakarta, prices from the Inter Dealer Market Association show. That is nine basis points off an all-time low of 4.18 percent reached on Feb. 15. 2012.
The rupiah’s one-month non-deliverable forwards strengthened 0.1 percent to 9,704 per dollar, data compiled by Bloomberg show. They traded at a 0.2 percent discount to the spot rate, which climbed 0.1 percent to 9,687, prices from local banks show. A daily fixing used to settle the rupiah derivatives was set at 9,699 yesterday, from 9,688 on March 6 by the Association of Banks in Singapore.
One-month implied volatility in the rupiah, which measures expected moves in the exchange rate used to price options, rose 7 basis points this week and one basis point today to 5.86 percent.