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Indonesian Bonds Have Fourth Weekly Gain as Inflation Slows

Feb. 3 (Bloomberg) -- Indonesia’s bonds had a fourth weekly gain as data showed inflation in Southeast Asia’s biggest economy eased for a fifth month in January.

Foreign ownership of government debt increased 5.8 percent to 235.85 trillion rupiah ($26.3 billion) this year through Jan. 31, finance ministry data show. Consumer prices in Indonesia rose 3.65 percent last month from a year earlier after climbing 3.79 percent in December, the Central Bureau of Statistics said Feb. 1. The rupiah dropped today as regional stocks snapped a three-day advance as Greece and its creditors struggled to reach an agreement on a debt swap.

“Inflation has been coming off in the past few months and that has pushed yields down,” said Tetsuo Yoshikoshi, a senior economist at Sumitomo Mitsui Banking Corp. in Singapore. “The risk appetite for emerging markets has strengthened.”

The yield on the government’s 7 percent bonds due May 2022 fell 30 basis points, or 0.30 percentage point, this week to 5.24 percent, according to midday prices by the Inter-Dealer Market Association. That’s the lowest level since the security was sold in September. The rate fell eight basis points today.

Moody’s Investors Service restored Indonesia to investment-grade credit status on Jan. 18, following Fitch Ratings the month before. Gross domestic product in Indonesia increased 6.45 percent in the fourth quarter from a year earlier, compared with a 6.5 percent pace in the previous three months, according to the median of 17 estimates in a Bloomberg News survey ahead of a government report due Feb. 6.

The rupiah dropped 0.2 percent to 8,979 per dollar today as of 3:30 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. It was little changed for the week. The currency reached 8,878 yesterday, just shy of the 12-week high of 8,875 it touched on Jan. 25.

Greece and its creditors are locked in talks over a debt-swap deal for the nation. Finance ministers from Germany, Finland, Luxembourg and the Netherlands will meet in Berlin today to discuss Europe’s debt crisis, a German Finance Ministry spokesman said yesterday

To contact the reporter on this story: Khalid Qayum in Singapore at kqayum@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

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