Indonesian Two-Year Bonds Gain for Seventh Day; Rupiah Steady

Indonesia’s two-year government bonds gained for a seventh day, the longest winning streak since February, after investors bid for nine times the amount offered at the latest auction. The rupiah was little changed.

The yield fell to the lowest level in almost seven months after the government canceled a Nov. 27 offer and raised 1.2 trillion rupiah ($125 million) at its final sale of the year on Dec. 3, with investors submitting 9.2 trillion rupiah of bids, according to an e-mailed statement from the debt management office. Foreign funds pumped the most money on record into Indonesian sovereign debt last month, finance ministry data show.

“Demand for bonds from overseas investors is still strong, so they may rally further,” said Artanavaro Gasali, the head of global markets at PT Bank ICBC Indonesia in Jakarta. “We have seen a greater supply of dollars from foreign banks, possibly due to capital inflows, so the rupiah will be under less pressure.”

The yield on the government’s 11 percent notes due October 2014 fell four basis points, or 0.04 percentage point, to 4.66 percent as of 4:12 p.m. in Jakarta, prices from the Inter Dealer Market Association show. That’s the lowest level since May 8. Gasali forecasts the yield on the 10-year securities will reach 5.2 percent by year-end from the current 5.37 percent.

Overseas investors held a record 269.85 trillion rupiah of local-currency sovereign bonds on Nov. 30, after boosting their holdings by 19.5 trillion rupiah in November, the biggest monthly inflow in finance ministry data going back to 2003.

The rupiah traded at 9,600 per dollar, after closing at 9,598 yesterday, prices from local banks compiled by Bloomberg show. Foreign funds pulled $56 million from local stocks yesterday, exchange data show.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, climbed 10 basis points to 4.75 percent today, the highest since Nov. 13.

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