Indonesia Bonds Rise After Central Bank Holds Rate; Rupiah Falls

Indonesia’s two-year government bonds advanced by the most in almost a week after the central bank held its reference rate unchanged for a 12th month. The rupiah fell, halting a three-day rally.

Bank Indonesia maintained its benchmark rate at a record-low 5.75 percent today, as forecast by all 17 analysts surveyed by Bloomberg. Overseas investors added 4.06 trillion rupiah ($421 million) to their local-currency sovereign debt holdings last week, the biggest inflow since November, finance ministry data show.

“We see room for short-term notes to rally after the rate was held,” said Dini Anggraeni, a Jakarta-based fixed-income analyst at PT Mandiri Sekuritas, a unit of the nation’s largest lender by assets. “Foreign funds also continue to buy into the local market.”

The yield on Indonesia’s 11 percent bonds due October 2014 declined two basis points, or 0.02 percentage point, to 4.41 percent as of 3:53 p.m. in Jakarta, prices from the Inter Dealer Market Association show. That was the biggest drop since Feb. 6.

Bank Indonesia will push for the creation of an onshore spot reference rate for the local currency, which is expected to boost liquidity and efficiency in the foreign-exchange market, it said in a statement in Jakarta today.

The rupiah weakened 0.3 percent to 9,644 per dollar after reaching a two-month high of 9,603 yesterday, according to prices from local banks compiled by Bloomberg. Its one-month non-deliverable forwards fell 0.3 percent to 9,635, trading at a 0.1 percent premium to the spot rate.

A daily fixing used to settle the derivative contracts was set at 9,685 on Feb. 8 by the Association of Banks in Singapore. Markets in the city-state were closed yesterday and today for the Chinese New Year holiday.

The rupiah’s one-month implied volatility, which measures expected moves in exchange rates used to price options, was unchanged at 6.5 percent for a seventh day.

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