Indonesian bonds decline as funds sell

Indonesian bonds decline as funds sell

Indonesia's local-currency bonds fell, the biggest fluctuation of
any government debt market today, as speculation the central bank
was going to buy bonds today proved unfounded, leading some
mutual funds to sell.

"There's talk the central bank is planning to intervene in the
market, but they are waiting to get a mandate from the board of
directors to do that," said Winston Sual, who helps manage the
equivalent of US$500 million at Panin Asset Management in
Jakarta.

"In the meantime, everyone is selling bonds."

Indonesian bonds have slumped in the past month, driving
yields higher, as record oil prices increased the cost of the
government's fuel subsidies and widened its budget deficit.

The central bank has increased interest rates to protect the
currency, making holding bonds less attractive.

The yield on the 14 percent bond due in June 2009, one of the
most-traded securities, rose 46 basis points, or 0.46 percentage
point, to 15.69 percent as of 3:23 p.m. in Jakarta, according to
prices supplied by Deutsche Bank AG.

The central bank last entered the market on Aug. 15, when it
bought Rp 855.6 billion ($82.6 million) of its local-currency
debt from bondholders in an effort to stem losses. -- Bloomberg