Indonesia’s dollar bonds declined, raising the 10-year yield to levels last seen two weeks ago, as the nation markets global notes at the highest rate since 2010.
Indonesia is offering securities maturing in October 2023 at 5.45 percent, Robert Pakpahan, director general at the debt management office, said in Jakarta today. That would be the highest for 10-year notes since 6 percent was paid in January 2010, data compiled by Bloomberg show. The government decided to borrow now because of uncertainty about what market conditions will be like later in the year, he said.
The yield on the 3.375 percent global bonds due April 2023 climbed 25 basis points, or 0.25 percentage point, to 5.14 percent as of 4:34 p.m. in Jakarta, the highest level since June 26, data compiled by Bloomberg show.
“The yield in the secondary market will rise to meet the indicative yield offered,” Mika Martumpal, the head of treasury research and strategy at PT Bank CIMB Niaga, said in Jakarta. “The offered rate is very high, probably to secure enough demand in this volatile environment.”
Bank Indonesia will increase its reference rate to 6.25 percent when it meets tomorrow, from 6 percent, according to 11 of 16 analysts surveyed by Bloomberg. Two predict no change, while three forecast a 50 basis point boost. Foreign-currency reserves fell to $98.1 billion in June, the least in more than two years, official data show, reducing the central bank’s scope to support the currency by intervention.
“There will be more spikes in inflation in the coming months, particularly in July, which could add to their impetus to hike more aggressively,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore. “The forex reserves data could be seen more as a concern that adds more currency weakness.” Nomura is forecasting a 50 basis point increase in the reference rate.
Rupiah one-month non-deliverable forwards gained 0.6 percent to 10,150 per dollar, data compiled by Bloomberg show. The contracts traded at a 1.8 percent discount to the rupiah’s spot rate, which declined 0.1 percent to 9,965 per dollar after touching 9,975, weakest level since September 2009, prices from local banks show. The currency will trade at 9,950 at year-end, Paracuelles said.
One-month implied volatility for the rupiah, a measure of expected moves in the exchange rate used to price options, dropped 37 basis points to 12.96 percent, according to data compiled by Bloomberg.