Indonesia’s rupiah fell the most in a week and government bonds declined after Spain’s borrowing costs rose, adding to concern Europe’s debt crisis will worsen and damping appetite for emerging-market assets.
Spain’s 10-year yields surged above 7 percent to reach euro-era records after it reported that bad loans jumped in April to the highest since 1994. Greek politicians begin a second day of talks to form a coalition government that can implement austerity measures tied to a 240 billion euro ($303 billion) bailout. Indonesia plans to raise Rp 5 trillion ($529 million) at a debt auction today, according to the finance ministry’s debt management office.
“The concern has moved from Greece to larger economies like Spain and Italy, which weighs on the rupiah,” said Nurul Eti Nurbaeti, the head of treasury research at Bank Negara Indonesia in Jakarta. “We see strong dollar demand constantly as even domestic investors and corporates prefer the dollar over the rupiah to avoid currency risk during uncertain times.”
The rupiah dropped 0.8 percent to 9,461 per dollar as of 9:17 a.m. in Jakarta, the biggest decline since June 7, according to prices from local banks compiled by Bloomberg. One-month implied volatility, which measures exchange-rate swings used to price options, held at 12 percent.
The yield on the government’s benchmark 10-year bonds climbed one basis point, or 0.01 percentage point, to 6.39 percent, after reaching a one-month low of 6.34 percent yesterday, data compiled by Bloomberg show.