Rupiah Drops as Indonesian Bonds are Set for Worst Quarter in 2 Years

Indonesia’s bonds headed for the worst three-month loss in two years on concern a government plan to cut subsidies will spur inflation. The rupiah fell for a seventh quarter in the longest losing streak since 1998.

Contracts measuring the nation’s credit risk climbed to an almost seven-month high as official data showed global investors pared purchases of local debt to 160 billion rupiah ($16 million) this month through March 26, from 8.43 trillion rupiah in February. Indonesia is considering steps to limit subsidized- fuel usage while not ruling out price increases, Finance Minister Agus Martowardojo said last week. Consumer prices gained 5.31 percent in February, the most in 20 months, the latest figures show.

“There is no clear indication on what will be done to fuel subsidies, but inflation will start rising from the February high even before any real changes in policy,” said Billie Fuliangsahar, the head of treasury at PT Rabobank International Indonesia in Jakarta. “I still see current yields as too low, considering the risks.”


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