Indonesian bonds fell, pushing the 10-year yield to an April 2011 high, after a U.S. jobs report bolstered the case for the Federal Reserve to cut stimulus that has fueled fund flows to emerging markets. Stocks dropped.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. brought forward their forecasts for the start of Fed tapering to September from December, after official data on July 5 showed U.S. payrolls increased by 195,000 workers in June, exceeding the 165,000 median forecast in a Bloomberg survey. Indonesia’s foreign-currency reserves fell to $98.1 billion last month, the lowest since January 2011, from $105.1 billion in May, according to a central bank report released late on July 5.
The yield on the 5.625 percent bonds due May 2023 surged 40 basis points to 7.8 percent as of 10:09 a.m. in Jakarta, the biggest increase since September 2011, according to prices from the Inter Dealer Market Association. It reached 7.87 percent earlier, the highest level since April 2011.
“The jobs data increased concern over Fed tapering, but nothing is certain as unemployment is still high,” said Dini Anggraeni, a fixed-income analyst at PT Mandiri Sekuritas in Jakarta. “The forex reserves are a concern, as it reduces the scope for the central bank to defend the currency.”
Fed Chairman Ben S. Bernanke said last month that $85 billion a month of debt buying may be tapered this year and ended in 2014. He said he expects the U.S. jobless rate to be about 7 percent when the Fed halts its stimulus, compared with 7.6 percent in June.
The rupiah declined 0.1 percent to 9,951 per dollar, according to prices from local banks. It traded at a 3.7 percent premium to the one-month non-deliverable forwards, which fell 0.1 percent to 10,324, data compiled by Bloomberg show.
One-month implied volatility for the rupiah, a measure of expected moves in the exchange rate used to price options, rose 42 basis points, or 0.42 percentage point, to 12.75 percent, data compiled by Bloomberg show.
The Jakarta Composite Index (JCI) of shares fell 2.2 percent, the second-biggest decliner among emerging Asian markets, as speculation Bank Indonesia will raise interest rates hurt banking and property stocks. The central bank will lift its reference rate to 6.25 percent from 6 percent on July 11, which would be the second increase in a row, according to seven of 10 analysts surveyed by Bloomberg. One sees a 50 basis point rise, while two forecast no change.
PT Bank Central Asia, the country’s biggest bank by market value, and PT Bank Rakyat Indonesia both fell 3.2 percent.
To contact the reporter on this story: Yudith Ho in Jakarta at firstname.lastname@example.org