Friday 29 Mar 2024
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KUALA LUMPUR (Oct 11): Total outstanding Malaysian Government Securities (MGS) and Government Investment Issues (GII) came in lower for the first time in September at RM702.2 billion (August 2018: RM706.1 billion) since February, according to Malaysian Rating Corporation Bhd (MARC).

The decline was attributed to the declining trend of gross issuance for MGS/GII papers which came in at RM8 billion in September (August 2018: RM9 billion) and a significantly high volume of matured MGS papers which amounted to RM11.9 billion from zero last month.

Year to date (YTD), gross issuance of MGS/GII papers grew by 4.7% year-on-year (y-o-y) to RM89.5 billion (2017 YTD: RM85.5 billion) with the GII-to-MGS ratio coming in at 51:49 (2017 YTD: 50:50), MARC said in its September bond market report.

The agency said the primary market performance for local government securities was better in September compared with August.

The government received total bids of RM18.5 billion (August 2018: RM23.4 billion) for its targeted RM8 billion (August 2018: RM9 billion) in issuances through three government offerings.

The 30-year GII garnered a decent bid-to-cover (BTC) ratio of 1.9 times with support mainly coming from local institutional investors amid news that the US is seeking fresh trade talks with China.

Meanwhile, both the 10-year MGS and 3.5-year GII saw solid buying interest with their respective BTC ratios of 2.7 times and 2.2 times.

"Demand for both of these issues was supported by lower-than-expected August Consumer Price Index data and increased appetite for emerging markets (EM) assets during the final week of the month," it said.

For the secondary market, MARC said the yields on local government securities ended broadly higher in September with most of the selling pressure concentrated on short-term notes amid ongoing concerns over the global trade war and EM contagion.

"Bank Negara Malaysia's dovish Monetary Policy Committee statement and its decision to hold the overnight policy rate at 3.25% had little impact on local govvies during the period," it said.

"Benchmark MGS yields rose m-o-m in September with its yield curve seen continuing to flatten with the three-year yield up by 13 basis point (bps) while shorter tenured benchmarks rose by between two bps to five bps. The 10-year MGS ended the month three bps higher at 4.04%," it added.

MARC said the 10-year and 3-year MGS spread narrowed to 46 bps in September, from 56 bps in August.

Foreign investors, it said, continued to be net sellers of local government securities in September amid a large volume of matured MGS papers during the period.

Due to the foreign fund outflows, the ringgit continued to depreciate against the US dollar, as a stronger US dollar limited the ringgit's gains from rising oil prices.

"The ringgit was traded mostly weaker against other major currencies except for the Japanese yen," the rating agency said.

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