Indonesia Five-Year Yield Drops Most This Week Since November

The yield on Indonesia’s five-year government bonds headed for its biggest weekly decline in five months as relatively high returns lured inflows. The rupiah fell.

Overseas funds have pumped 8.72 trillion rupiah ($897 million) into the country’s local-currency notes since April 3, the day before Japan’s central bank said it would buy 7.5 trillion yen ($76 billion) of debt per month to stimulate its economy. Japan will use its foreign-exchange reserves to buy Southeast Asian government debt, the Nikkei newspaper reported today, without citing anyone.

The yield on the 5.25 percent bonds due May 2018 fell 15 basis points this week, the most since Nov. 16, to 4.92 percent in Jakarta, according to prices from the Inter Dealer Market Association. The rate was little changed today. Similar-maturity sovereign securities in the Philippines yield 3.16 percent, while those in Thailand yield 3.18 percent.

“I’m optimistic that foreign flows will continue into Indonesia for the rest of the year,” said Nurul Eti Nurbaeti, the head of treasury research at PT Bank Negara Indonesia in Jakarta. “Yields here are very attractive for foreigners and the bond market may move higher.”

The government received 22.3 trillion rupiah of bids at a debt auction this week, exceeding the 7 trillion rupiah target, the finance ministry’s debt management office said in a statement on its website on April 23.

The rupiah fell 0.1 percent today and 0.2 percent this week to 9,725 per dollar, according to prices from local banks compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped seven basis points to 5.59 percent today and 23 basis points, or 0.23 percentage point, this week.

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