Rupiah Forwards Plunge to Lowest Since 2009 as Bond Risk Surges

Rupiah forwards slumped to a four-year low after Indonesia’s debt risk surged to the highest since October 2011 on concern the Federal Reserve will taper stimulus that has driven funds into emerging-market assets.

Five-year credit-default swaps insuring the Southeast Asian nation’s debt against default has risen 56 basis points to 283 since the central bank kept its reference rate at 6.5 percent on Aug. 15, according to CMA, which is owned by McGraw-Hill Cos. The Fed will start tapering its monthly bond purchases in September, according to 65 percent of analysts surveyed by Bloomberg this month. The Jakarta Composite index of shares has erased this year’s gains.

“The rupiah will still be under selling pressure due to global sentiment, along with local assets,” said Mika Martumpal, head of treasury research and strategy at PT Bank CIMB Niaga in Jakarta. “Risk indication surged following disappointment over Bank Indonesia refraining from raising rates to support the currency and attract inflows.”

The rupiah’s one-month non-deliverable forwards fell 2.3 percent, the biggest drop since June 20, to 11,094 per dollar as of 9:54 a.m. in Jakarta, data compiled by Bloomberg show. The contracts touched 11,107, the weakest since April 2009, and traded at a 5.3 percent discount to the spot rate, the widest gap since September 2011. The currency declined 0.1 percent to 10,495, prices from local banks show.

A fixing by the Association of Banks in Singapore used to settle the derivative contracts was set at 10,499 yesterday, the lowest since June 2009. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 101 basis points, or 1.01 percentage point, to 14.60 percent, according to data compiled by Bloomberg

The yield on the nation’s bonds due May 2023 was little changed at 8.37 percent, prices from the Inter Dealer Market Association show. It reached 8.41 percent yesterday, the highest level since March 2011.

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