Indonesian Bond Climbs on Fuel-Price Cut Expectation
The Indonesian sovereign bonds rose on Friday, pushing the 10-year yield down the most in a month, on speculation a cut in domestic fuel prices will keep inflation in check. The price consumers pay for gasoline was lowered 7.2 pct to 6,450 rupiah (RM1.91) a litre, while diesel was reduced 8.8 pct to 5,150 rupiah a litre.
The yield on the government’s 10-year bonds fell 10 bps to 7.57 pct and it dropped 21 bps this week. Indonesian rupiah sovereign notes have returned 8.1 pct in 3 months, the most in Asia, according to Bloomberg indexes.
“The changes are effective today and, while prices are reviewed every quarter, the new levels are hoped to be maintained for 6 months”, Energy Minister Sudirman Said told reporters
“The biggest driver was the decision on fuel-price cuts,” said Dini Agmivia Anggraeni, a fixed-income analyst at Trimegah Securities in Jakarta.
Bank Indonesia has cut its benchmark rate three times this year, to 6.75 pct. The monetary authority will likely hold borrowing costs in April, but there will probably be more reductions later in 2016 and into 2017, pushing bonds to new high.
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