Indonesia’s local-currency bonds dropped, pushing the 10-year yield to the highest level since November, on speculation investors are shifting their holdings to dollar notes amid concern that inflation will quicken.
Indonesia is marketing 10-year bonds denominated in the U.S. currency to yield about 3.625 percent, and notes maturing in 30 years around 4.95 percent in its first global sale this year, according to a person familiar with the matter. That compares with the 3.35 percent offered in the secondary market by dollar securities due April 2022, data compiled by Bloomberg show. Consumer prices gained 5.9 percent from a year earlier in March, the most in 22 months, official figures show.
“The sale might see investors opting to hold dollar bonds to protect their investment from inflation,” said I Made Adi Saputra, a fixed-income analyst at PT Nusantara Capital Securities in Jakarta. “The new bonds offer a good premium over yields in the secondary market.”
The yield on the government’s 5.625 percent rupiah bonds due May 2023 climbed eight basis points, or 0.08 percentage point, to 5.65 percent as of 3:38 p.m. in Jakarta, the highest level since Nov. 1, according to prices from the Inter Dealer Market Association. The yield on the dollar notes due 2022 dropped two basis points today, data compiled by Bloomberg show.
Global funds sold 3.99 trillion rupiah ($409 million) more of Indonesia’s local-currency sovereign debt than they bought since the holdings reached an all-time high of 284.85 trillion rupiah on March 14, finance ministry data show.
The central bank will likely keep its reference rate unchanged at a record-low 5.75 percent for a 14th month when it meets on April 11, according to all 14 economists in a Bloomberg survey. Bank Indonesia may increase the deposit facility rate, or Fasbi, from the current 4 percent to narrow the gap with the benchmark, Societe Generale SA strategist Wee-Khoon Chong wrote in a note today.
The rupiah fell 0.2 percent to 9,759 per dollar, the biggest loss since April 1, prices from local banks compiled by Bloomberg show. It traded at a 0.2 percent premium to its one-month non-deliverable forwards, which advanced 0.1 percent to 9,780, data compiled by Bloomberg show.
A daily fixing used to settle the derivatives was set at 9,756 today by the Association of Banks in Singapore, the same level as on April 5. One-month implied volatility for the rupiah, a measure of expected moves in the exchange rate used to price options, fell 12 basis points to 5.83 percent.