Indonesia’s five-year bonds were headed for an eighth weekly gain, the longest winning streak since April 2010, as the second-highest yields in Asia attracted funds from abroad, while the rupiah weakened.
Global funds added Rp 2.23 trillion ($232 million) to their holdings of local-currency sovereign debt in the first two trading days of this month, following a record Rp 19.5 trillion increase in November, official data show. Bank Indonesia will maintain its benchmark interest rate at a record-low 5.75 percent for a 10th month when it meets on Dec. 11, according to all eight economists in a Bloomberg survey.
The yield on the government’s 10 percent bonds maturing in July 2017 fell seven basis points this week, or 0.07 percentage point, to 4.91 percent as of 9:32 a.m. in Jakarta, the lowest level since May 7, prices from the Inter Dealer Market Association show. Among 13 Asia-Pacific debt markets tracked by Bloomberg, only India’s five-year yield of 8.13 percent is higher. Similar-maturity U.S. Treasuries yield 0.60 percent.
“Capital inflows can continue as investors seek yield and rates are likely to remain stable until the end of the year,” said Billie Fuliangsahar, the Jakarta-based head of treasury at Bank Rabobank International Indonesia. “The tendency for the rupiah to decline is still strong due to demand for dollars and the weak trade position.”
Indonesia’s trade balance swung to a record deficit of $1.5 billion in October, from a revised surplus of $549.5 million the previous month, official data show. This quarter’s current- account deficit may be equivalent to 2.2 percent of gross domestic product, the highest proportion since 1997, Bank Indonesia Governor Darmin Nasution said on Thursday.
The rupiah fell 0.3 percent this week to 9,626 per dollar, after declining in all but one of the last 10 months, prices from local banks compiled by Bloomberg show. The currency weakened 0.2 percent on Friday.
One-month implied volatility, a measure of expected moves in exchange rates used to price options, climbed seven basis points this week to 4.67 percent.