Indonesia Bonds Suffer Biggest Outflows in a Year on Fed Outlook

Foreign funds pulled the most money from Indonesian government bonds in more than a year as demand for higher-yielding assets waned ahead of the U.S. presidential election and an expected increase in Federal Reserve interest rates.

Overseas investors sold $369 million of the nation’s debt Monday, the most since June 2015 and an eighth day of outflows, which was the longest since March 2015, according to data compiled by Bloomberg. The selling came as the rupiah weakened after reaching a 17-month high in September on optimism a tax amnesty program initiated by President Joko Widodo would bolster the outlook for Southeast Asia’s biggest economy.

“Domestically, there isn’t much to drive a continued rally,” said Ikhwani Fauzana, head of rates trading at PT Bank Negara Indonesia in Jakarta. “The tax amnesty euphoria is past and right now we’re in a limbo. Investors will likely remain cautious on riskier assets like Indonesia while they wait and see on the U.S. election.”

The rupiah climbed 0.2 percent to 13,004 per dollar as of 10:51 a.m. in Jakarta, taking its gain in the past month to 1.2 percent, the best performance among emerging Asian currencies. The yield on 10-year sovereign notes was little changed at 7.12 percent.

Indonesian five-year notes offer the highest yields in Asia and have been particularly attractive in an environment where an estimated $10 trillion of debt worldwide have yields below zero. A tax amnesty program started in July has so far brought in revenue of 97.6 trillion rupiah ($7.5 billion), about 60 percent of the government’s target.

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