Indonesia 10-Year Bond Yield Has Biggest Weekly Drop in 5 Months

Indonesia’s government bonds gained this week, pushing the 10-year yield down by the most in five months, as the nation’s relatively high yields lured inflows.

Overseas investors bought 620 billion rupiah ($64 million) more local-currency sovereign debt than they sold this month through May 7, adding to the 18 trillion rupiah of inflows in April, finance ministry data show. The central bank is focused on stabilizing the currency, Deputy Governor Perry Warjiyo said last week. The rupiah was little changed for the week.

The yield on the 5.625 percent notes due May 2023 dropped 11 basis points to 5.47 percent for the week, the most since the five days ended Dec. 14, according to closing prices from the Inter Dealer Market Association. That compares with rates of 3 percent for similar-maturity Philippine bonds and 3.35 percent for Thai debt.

“The market’s appetite for Indonesia’s yield is still good despite slower growth, which is still above 6 percent,” said Fahrudin Haris Prastowo, a foreign-exchange trader at PT Bank Rakyat Indonesia in Jakarta. “Stabilizing the rupiah also helps spur inflows.”

The central bank will announce its rupiah spot reference on May 20, which will be calculated using actual rates in the market collected through 9:45 a.m. and released at 10 a.m. in Jakarta, Warjiyo said today.

The economy has expanded by more than 6 percent for the past 10 quarters, official data show. It grew 6.02 percent in the three months through March, the slowest pace in more than two years, from 6.11 percent in the previous quarter.

Volatility Rises

The rupiah declined 0.2 percent to 9,737 per dollar as of 4:18 p.m. in Jakarta today, according to prices from local banks compiled by Bloomberg. It traded at a 0.2 percent premium to one-month non-deliverable forwards, which advanced 0.3 percent this week and fell 0.4 percent today to 9,759 per dollar, according to data compiled by Bloomberg.

A daily fixing used to settle derivatives was set at 9,738 today by the Association of Banks in Singapore, compared with 9,744 on May 3. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 38 basis points, or 0.38 percentage point, this week and 36 basis points today to 5.99 percent.

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