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Indonesian 10-Year Bond Yield Drops to Eight-Month Low on Growth

Nov. 5 (Bloomberg) -- Indonesia’s bonds rallied, pushing the 10-year yield to the lowest level since March, after data showed economic growth exceeded 6 percent for an eighth quarter. The rupiah weakened.

Gross domestic product rose 6.17 percent last quarter, the statistics bureau said today, matching analyst estimates and compared with 6.37 percent in the previous period. Overseas funds raised holdings of local debt to 250.75 trillion rupiah ($26 billion) on Nov. 1, the highest since September 2011, finance ministry data show. Bank Indonesia will probably keep its reference rate at 5.75 percent on Nov. 8, according to all 16 analysts in a Bloomberg survey, even after South Korea, Thailand and the Philippines cut borrowing costs last month.

“Foreign investors have been buying aggressively,” said Handy Yunianto, the head of fixed-income research at PT Mandiri Sekuritas, a unit of the nation’s largest bank by assets. “While other nations had to cut rates to boost their economy, Indonesia is still going strong.”

The yield on the government’s 7 percent notes maturing in May 2022 dropped one basis point, or 0.01 percentage point, to 5.62 percent as of 3:41 p.m. in Jakarta, the lowest level since March 5, prices from the Inter Dealer Market Association show.

The rupiah declined 0.2 percent to 9,630 per dollar, prices from local banks compiled by Bloomberg show. The currency reached a three-year low of 9,664 on Nov. 1. One-month implied volatility, which measures exchange-rate swings used to price options, held at 5 percent.

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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