Indonesia 10-Year Yield Rises to Five-Week High on Rate Decision

Indonesia’s bonds fell, pushing the 10-year yield to the highest level in five weeks, as the central bank kept the benchmark rate unchanged.

Bank Indonesia left the policy rate at 7.75 percent, it said in a statement today, after raising it last month to the highest since March 2009. The decision was predicted by all 21 analysts surveyed by Bloomberg. Annual inflation quickened to 6.23 percent in November, the fastest pace in five months and exceeding the monetary authority’s 2014 target of 3.5 percent to 5.5 percent. The nation may see a further acceleration after the government increased fuel prices on Nov. 18.

“Bank Indonesia wants to be ahead of the curve, so further rate hikes aren’t out of the picture,” said I Made Adi Saputra, a Jakarta-based fixed-income analyst at PT BNI Securities. “We expect the inflationary impact of the fuel-price increase to peak in December, so January may provide a buying opportunity.”

The yield on government notes due March 2024 climbed three basis points, or 0.03 percentage point, to close at 8.01 percent in Jakarta, prices from the Inter Dealer Market Association show. That’s the highest level since Nov. 7.

Inflation in December will likely quicken to 2 percent from the previous month, more than November’s 1.5 percent, after the fuel-price increase, central bank Governor Agus Martowardojo said on Dec. 2. Global funds pulled 6.8 trillion rupiah ($549 million) from their holdings of Indonesian debt this month as of Dec. 9, finance ministry data show.

The rupiah fell 0.1 percent to 12,349 per dollar, prices from local banks show. In the offshore market, one-month non-deliverable forwards were little changed at 12,426, data compiled by Bloomberg show. Bank Indonesia set a fixing used to settle the contracts at 12,336 today, the same as yesterday.

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