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Indonesia’s Bond Yields Decline to Two-Month Low; Rupiah Weakens

Indonesia’s bonds advanced, pushing the two-year yield to the lowest level since August, as foreign holdings reached the highest in a year. The rupiah dropped to a one-week low.

Global funds purchased 2.36 trillion rupiah ($246 million) of local debt last week, taking total ownership to 244.3 trillion rupiah on Oct. 4, the highest level since September 2011, Finance Ministry data show. The International Monetary Fund said today the world economy will grow 3.3 percent this year, the slowest pace since 2009, compared with the 3.5 percent it predicted in July. Indonesia’s growth accelerated to 6.37 percent in the second quarter from 6.3 percent in the preceding three months, official data show.

“The market is still in a wait-and-see mode, with some investors seeking higher yields such as those offered by Indonesian bonds,” said Billie Fuliangsahar, the head of treasury at PT Rabobank International Indonesia in Jakarta. “The lower growth forecast from the IMF has little impact as the local economy remains strong.”

The yield on the government’s 11 percent notes due October 2014 dropped one basis point, or 0.01 percentage point, to 5.28 percent as of 3:29 p.m. in Jakarta, the lowest level since Aug. 13, prices from the Inter Dealer Market Association show.

The rupiah declined 0.2 percent to 9,609 per dollar, the lowest level since Sept. 27, prices from local banks compiled by Bloomberg show. One-month implied volatility, which measures exchange-rate swings used to price options, held at 6 percent.

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