Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on March 19, 2019

KUALA LUMPUR: Foreign holdings of Malaysian bonds surged by RM4.5 billion in February to break a three-month streak of outflows, said RAM Rating Services Bhd.

During that month, the Malaysian bond market enjoyed renewed foreign interest alongside other emerging markets, largely attributable to the US Federal Reserve’s (Fed) dovish stance highlighted in its Jan 30 monetary policy statement, RAM said in a statement yesterday.

“Portfolio outflow pressures have been somewhat reduced by the Fed’s more dovish tone and, more recently, the growth concerns expressed by the European Central Bank and the subsequent pause in elevating policy rates,” said RAM head of research Kristina Fong.

“However, there may still be a flight to safety, especially [due to] the US-China trade spat and [as] Brexit dynamics have yet to be resolved,” Fong said.

In February, government bond issuance amounted to RM8 billion, compared with RM13 billion in January.

“The 10-year MGS (Malaysian Government Securities) and 15-year Government Investment Issues in February achieved very strong bid-to-cover ratios of 2.54 and 3.91 times respectively,” said the statement.

“Issuance of corporate bonds summed up to RM9.1 billion for the month from RM5.8 billlion in January, backed by healthy issuance from both the quasi-government and private sectors,” it added.

Concurrently, yields to maturity of government and corporate bonds have declined month-on-month across the rating spectrum.

The yield of the benchmark 10-year MGS dived in the first half of February, falling below the psychological level of 4% on Feb 13, 2019 — the first time since April 11, 2018.

Moving forward, yields are expected to face some further downward pressure as the market is also considering the prospect of an overnight policy rate cut by Bank Negara Malaysia, following the central bank’s more cautious tone in its latest monetary policy statement.

      Print
      Text Size
      Share