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Bloomberg
Indonesia’s market rout shows no signs of abating, with its two-year bonds the latest to be dumped in anticipation that the central bank may need to raise rates to defend its currency.
The yield on the two-year debt soared 34 basis points to a
10-month high of 6.73 percent as the currency weakened past the psychological 14,000 level. The stock index has tumbled to its lowest since August.
The selldown has Bank Indonesia caught between mounting pressure to raise rates and an economy that isn’t growing fast enough. An emerging market rout that started as US Treasury yields touched a four-year high last month has hurt the Southeast Asia nation given its relatively open economy and the high foreign ownership of its assets.
“There seems to be an increase in market anxiety after the rupiah breached the 14,000 threshold,†said Winson Phoon, head of fixed-income research at Maybank Kim Eng Securities Pte. in Singapore.
The rupiah fell 0.4 percent to 14,052 per dollar, after touching 14,053, the weakest since December 2015. The 10-year bond yield rose 10 basis points to 7.26 percent. Dollar bonds of Indonesia’s state-owned entities were sold off as well, with oil producer PT Pertamina’s 2044 notes down 1.9 cents to 106 cents in Jakarta.
At an auction, the Finance Ministry turned down all $511.7 million of bids it received, rejecting the higher yields sought by investors. The government was looking to raise 17 trillion rupiah from the sale of bills and bonds with maturity going to 20 years.