• PRESS RELEASES

Prospects of looser US Fed policy drew foreign bond investors back to Malaysia in June

Published on 18 Jul 2019.

Share Tweet Email

Foreign bond investors’ interest in Malaysian bonds perked up in June (with a net inflow of RM6.6 bil), following two consecutive months of net selling. The renewed demand is mostly attributable to the increasing dovishness of central banks in major global economies amid weaker-than-expected economic data. In line with the downward bias in global interest rates and the subsequent search for yields, domestic bond yields also retreated across the entire maturity spectrum and rating bands in June. 

The stronger demand in the secondary market is mirrored by the primary market, as underlined by the robust bid-to-cover (BTC) ratios at government bond auctions last month. Both issues that were up for tendering achieved BTC ratios of above 2 times. Demand for the longer-tenured 20-year GII issue achieved a remarkably strong BTC ratio of 4.28 times while the 5-year MGS charted 2.48 times.

Yields are expected to continue facing downward pressure in July, after investors received yet another clear sign of a looming rate cut from the US Federal Reserve (the Fed) Chairman’s remarks to Congress on 10 July, and another speech at a Paris event to commemorate Bretton Woods the following week. Chairman Powell, during his speech, had reaffirmed the Fed’s concerns about economic prospects and was ready to take appropriate measures to maintain the recovery momentum. These successive signals had prompted the market to start pricing in a potential 50 bps cut, compared to the 25 bps reduction indicated by the fed funds futures market before Powell’s speech. 

“There is a multitude of considerations for portfolio investors at this point – whether to pursue yields or seek safety in more conservative assets. As particular factors may dominate at different times, depending on prevailing market developments, volatile capital flows are envisaged to remain a key trend this year,” explains RAM’s head of research, Kristina Fong.


Analytical contact
Woon Khai Jhek, CFA
(603) 3385 2512
khaijhek@ram.com.my

Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2019 by RAM Rating Services Berhad



Publication Date Published Category
Bond Market Monthly - July 2019 18-Jul-2019 Bond Market Monthly View PDF

Loading...