Indonesia’s 10-year bonds advanced for a fifth day, the longest winning streak since January, after the government rejected offers at a debt auction last week in a sign it can tame inflation.
The benchmark notes began the rally after the finance ministry raised 4.5 trillion rupiah ($463 million) in an April 9 auction, shy of its 7 trillion rupiah target. Investors asked for yields as high as 5.50 percent for five-year bonds and the average yield granted was 5.23 percent, while the government rejected all bids for debt maturing in 2023. Consumer prices gained 5.90 percent last month, the most since May 2011.
“The government limited the supply and refused to grant the higher rates demanded, showing confidence inflation will ease,” said Herdi Wibowo, head of debt capital markets at PT BCA Sekuritas, a unit of the nation’s largest bank by market value. “Inflation will not accelerate from March as food prices should already moderate.”
The yield on the 5.625 percent bonds due May 2023 dropped three basis points, or 0.03 percentage ppoint, to 5.44 percent as of 8:36 a.m. in Jakarta, the lowest since March 13, prices from the Inter Dealer Market Association show.
The cost to insure Indonesia’s debt using five-year credit- default swaps fell 16 basis points last week to 143, the biggest decline since November, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The rupiah traded at 9,709 per dollar, little changed from the April 12 close of 9,713, prices from local banks compiled by Bloomberg show. The currency’s one-month non-deliverable forwards were steady at 9,709 per dollar, according to data compiled by Bloomberg.
A daily fixing used to settle the derivatives was set at 9,710 on April 12 by the Association of Banks in Singapore, from 9,688 the previous day. 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 six basis points to 5.93 percent.
To contact the reporter on this story: Yudith Ho in Jakarta at firstname.lastname@example.org