Indonesian Bonds to Stocks Fall Amid Diminished Risk Appetite

Indonesia’s government bonds fell, and the nation’s currency and stocks dropped, after weak economic data and renewed tensions in Ukraine curbed demand for riskier assets.

The benchmark notes extended declines after data released Aug. 4 showed consumer prices rose 4.53 percent in July from a year earlier. That compared with a 4.40 percent estimate in a Bloomberg survey of analysts. The rupiah ended a two-day rally after Russian President Vladimir Putin ordered his government to prepare a response to U.S. and European sanctions, as Poland warned that increased Russian military presence on Ukraine’s borders raises the possibility of invasion.

The yield on the government’s 8.375 percent bonds due March 2024 rose three basis points, or 0.03 percentage point, to close at 8.22 percent, the highest since June 27, according to the Inter Dealer Market Association. The rupiah and stocks fell after separate reports showed Indonesia’s economy grew the least since 2009 last quarter, and the trade balance swung to a deficit.

“All the disappointing economic data prompted investors to take profit,” said Dini Agmivia Anggraeni, a fixed-income analyst at PT Maybank Kim Eng Securities in Jakarta. “Rising tensions in Ukraine curbed investor appetite for riskier assets, so that didn’t help Indonesian assets either.”

The rupiah fell 0.5 percent to 11,750 per dollar, according to prices from local banks. The Jakarta Composite Index of shares declined 1 percent to 5,058.23, the lowest close since July 14, as exchange data showed global investors sold a net $11.16 million of local equities yesterday.

Growth, Deficit

Indonesia’s gross domestic product increased 5.12 percent last quarter from a year earlier, official data showed yesterday, short of the 5.20 percent median estimate of 20 analysts surveyed by Bloomberg. An Aug. 4 report showed a $305 million trade deficit in June following a revised $53.3 million surplus in the previous month.

In the offshore markets, one-month non-deliverable forward contracts in the rupiah dropped 0.6 percent to 11,825 per dollar, 0.6 percent weaker than the onshore spot rate, according to data compiled by Bloomberg.

Bank Indonesia set a fixing used to settle the contracts at 11,756 per dollar today, from 11,733 yesterday. One-month implied volatility, a measure of expected exchange-rate swings used to price options, fell nine basis points to 9.76 percent, data compiled by Bloomberg show.

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