Rupiah Forwards Set for Best Week Since February After Debt Sale

Indonesia’s rupiah forwards were set for the best week since February as investor demand at an overseas debt auction signaled increasing appetite for local assets. Sovereign bonds rose.

The government raised $3 billion from 10- and 30-year notes this week, with bids totaling $12.5 billion, according to a finance ministry statement. The 2023 bonds were sold at a yield of 3.50 percent, a record low for non-Islamic dollar securities issued by the Southeast Asian nation. Bank Indonesia kept borrowing cost at an unprecedented 5.75 percent low yesterday, as predicted by all 16 economists surveyed by Bloomberg.

“The rupiah turned around and began to strengthen after the global sale, showing appetite for Indonesian assets is still strong,” said Rully Nova, a currency analyst at PT Bank Himpunan Saudara 1906 in Jakarta. “The sale will add to foreign reserves and reduce the rupiah’s volatility by extension.”

One-month non-deliverable forwards advanced 0.5 percent this week to 9,733 per dollar as of 9:59 a.m. in Jakarta, the biggest gain since the five days ended Feb. 1, according to data compiled by Bloomberg. They traded at a 0.2 percent discount to the spot rate, which rose 0.3 percent to 9,710, prices from local banks compiled by Bloomberg show. The contracts and the rupiah were little changed today.

Default Swaps

A daily fixing used to settle the derivatives was set at 9,688 yesterday by the Association of Banks in Singapore. Today’s rate will be released at 11:30 a.m. in the city-state.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed three basis points this week to 5.98 percent.

Foreign reserves may recover this quarter, Nova said. They totaled $104.8 billion in March after dropping $8 billion during the quarter, the biggest decline since Bloomberg began compiling the figures in 1998.

The cost to insure the nation’s government debt using five- year credit-default swaps declined this week, dropping 16 basis points to 142 in New York, the most since the five days ended Nov. 23, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The yield on the 5.625 percent bonds due May 2023 dropped two basis points, or 0.02 percentage point, to 5.56 percent for the week, prices from the Inter Dealer Market Association show. The new 10-year dollar-denominated notes with a coupon rate of 3.375 percent yielded 3.26 percent today, data compiled by Bloomberg show.

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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