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Indonesian Bonds Offers the Highest Yield
Indonesia's local-currency bonds have handed investors a 10 percent gain this year, the best performance among 10 local- currency Asian debt indexes compiled by HSBC Holdings Plc. Investors snapped up the debt as a 9 percent rally in the rupiah since Jan. 1 and $5.5 billion in standby loans from multilateral lenders boosted confidence in the nation's finances. Moody's Investors Service on June 11 raised Indonesia's credit rating outlook to "positive," which may lead to an increase in credit rating in the next 18 months. Moody's rates Indonesia Ba3, the third highest non-investment-grade rating.
The central bank, which started cutting rates in December, will lower the reference rate tomorrow by a quarter-percentage point to 6.75 percent, 16 of 20 economists predicted in a Bloomberg survey. Four predicted no change. Indonesia's bonds will extend a rally that pushed yields to a 16-month low as cooling inflation allows the central bank to cut interest rates, ING Groep NV, PT Mandiri Sekuritas and Australia & New Zealand Banking Group Ltd. said. Yields on 10-year notes will drop 1.5 percentage points to 9.5 percent by the end of this year, the lowest level since November 2007, said Handy Yunianto, a Jakarta-based bond analyst at Mandiri. Five-year bond yields will drop 70 basis points to 9 percent, ING said. "Falling inflation is positive for bonds," Prakash Sakpal, an economist in Singapore at ING, the largest Dutch financial- services company, said in an interview yesterday. Sakpal said Bank Indonesia will lower borrowing costs at a meeting tomorrow.read source article