Indonesian 10-Year Bond Yield Rises to December High After Sale

Indonesia’s bonds fell, pushing the 10-year yield to the highest level since December, after investors drove up borrowing costs at a debt auction amid the fastest inflation in 20 months.

The finance ministry sold 7.2 trillion rupiah ($743 million) of 10-year notes today, attracting the smallest amount of bids this year, it said in a statement on its website. Investors asked for rates as high as 5.53 percent and received average yields of 5.40 percent, compared with 5.39 percent in the secondary market. Consumer prices gained 5.31 percent last month, the most since June 2011.

“Bonds adjusted to the higher yields won at the auction as investors demanded higher rates to account for faster inflation,” said Dini Anggraeni, a fixed-income analyst at PT Mandiri Sekuritas in Jakarta, the unit of the nation’s largest lender by assets. “There are expectations inflation will remain elevated.”

The yield on the 5.625 percent bonds due May 2023 climbed four basis points, or 0.04 percentage point, from March 11 to 5.39 percent, the highest level since Dec. 10, closing prices from the Inter Dealer Market Association show. Local markets were closed yesterday for a holiday.

HSBC Holdings Plc is overweight on Indonesian debt as a rally in government securities elsewhere in the region makes it more likely that the nation’s notes will be next, Hong Kong-based rate strategist Pin Ru Tan said in an interview.

The rupiah advanced 0.1 percent from March 11 to 9,692 per dollar as of 4:10 p.m. in Jakarta, prices from local banks compiled by Bloomberg show. The spot rate was at a 0.2 percent premium to one-month non-deliverable forwards, which were little changed at 9,708.

A daily fixing used to settle the derivative contracts was set at 9,697 per dollar today by the Association of Banks in Singapore, compared with 9,687 yesterday.

The rupiah’s one-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell six basis points to 5.59 percent.

Before it's here, it's on the Bloomberg Terminal.