Indonesia missed its target at an Islamic bond sale Tuesday as investors submitted the lowest amount of bids in at least a year amid speculation the central bank will raise borrowing costs this week.
The finance ministry sold 395 billion rupiah ($40 million) of six-month Shariah-compliant bills today, rejecting all bids for five-, 14-, 24- and 30-year sukuk, according to an e-mailed statement from the debt management office.
Some 851 billion rupiah of bids were submitted, short of the 1.5 trillion rupiah target.
That was the smallest bid-to-cover ratio in finance ministry data going back to May 2012. Bank Indonesia will raise its reference rate to 6.25 percent from 6 percent on July 11, according to 11 of 15 analysts surveyed by Bloomberg.
Two economists predict a 50 basis point increase and two forecast no change. The nation’s foreign-exchange reserves dropped to $98.1 billion last month, the least in two years, causing concern the central bank won’t have enough firepower to prevent the rupiah from weakening.
“Investors are in a wait-and-see mode before the Bank Indonesia meeting on expectations for further rate increases,” said I Made Adi Saputra, a fixed-income analyst at PT Nusantara Capital Securities in Jakarta.
“Foreign-reserves data are causing negative sentiment, so we see investors demanding very high rates.”
The nation sold Shariah-compliant notes due in six months at 6.73 percent, the finance ministry said in the statement. Buyers demanded yields as high as 7.13 percent, compared with the 6.04 percent rate granted at the previous auction on June 25.
Six-month bills rose four basis points, or 0.04 percentage point, to 6.18 percent in the secondary market.