SINGAPORE (May 26): Malaysia's new government has discovered it has a lot more debt outstanding than the previous administration had previously reported, and that will drive MYR bond yields higher. The spread between 10-year MYR and SGD bonds is particularly vulnerable as it had been narrowing into the recent general election.

To get Malaysia's finances back under control is going to be a multi-year task, and that may test the patience of investors and credit-rating companies. The yield spread is likely to settle in a range above 200bps given Singapore doesn't face the same funding pressures.