- Go to Format > Advanced and check "Make Master Objects Selectable".
- Drop the image you want to use as your watermark into the document.
- With the image selected, under "Wrap" options in the "Inspector" select "In Background" as "Object Placement".
- Check that "Background objects are selectable".
- Go back to Format > Advanced and check "Move Object to Section Master".
- Uncheck "Background objects are selectable"
Your image is now the background image for all pages and is essentially a watermark.