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Indonesian Bonds Rise on Optimism Stable Rupiah to Spur Inflows

Jan. 21 (Bloomberg) -- Indonesia’s government bonds rose, pushing the benchmark 10-year yield to the lowest in a week, on optimism a more stable rupiah will spur capital inflows.

The rupiah’s one-month implied volatility, a measure of expected moves in exchange rates used to price options, held at 6.75 percent for the seventh day today. The currency’s spot rate advanced 0.1 percent to 9,625 per dollar, prices from local banks compiled by Bloomberg show. The central bank has and will introduce policies to boost the exchange rate to 9,400 to 9,600, Investor Daily Indonesia reported today, citing Governor Darmin Nasution.

The yield on the 5.625 percent bonds due May 2023 dropped one basis point, or 0.01 percentage point, to 5.25 percent as of 3:36 p.m. in Jakarta, the lowest since Jan. 11, according to prices from the Inter Dealer Market Association. Indonesia’s 10-year yield compares with 4.54 percent for similiar-maturity Philippine notes and 3.68 percent for Thailand’s securities.

“The yields still have room to decline further,” said Billie Fuliangsahar, the head of treasury at PT Rabobank International Indonesia in Jakarta. “The rupiah has been quite stable, allowing for better confidence, and local yields remain attractive compared to other nations.”

The rupiah’s one-month non-deliverable forwards strengthened 0.2 percent to 9,823 per dollar, data compiled by Bloomberg show. That’s 2 percent weaker than the spot rate. A daily fixing used to settle the derivative contracts was set at 9,823 today by the Association of Banks in Singapore.

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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