Surprise OPR cut and COVID-19 outbreak pushed Malaysian bond yields lower in January

Published on 19 Feb 2020.

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Malaysian bond yields fell sharply across the board in January. The benchmark 10-year MGS yield declined 17 bps to 3.15%, its lowest level since January 2009. This followed Bank Negara Malaysia’s pre-emptive 25 bps OPR cut on 22 January, to mitigate downside risks arising from the volatile external environment and policy uncertainties. While market consensus - including RAM – points to at least one rate cut in 1H 2020, the earlier-than-expected OPR reduction had caught everyone by surprise. The immediate aftermath was a 13 bps drop in the 10-year MGS yield to 3.19%.

Meanwhile, the rapid spread of COVID-19 has exacerbated fears of dampened economic growth. The pandemic has taken a toll on various industries and disrupted supply chains, thus raising the prospect of even looser monetary policy. The epidemic has also triggered “flight to safety” sentiment, with investors flocking towards less risky fixed income assets. These factors had exerted downward pressure on bond yields, leading to a 41 bps plunge in benchmark 10-year US Treasury yields as at end-January. Despite this, the Malaysian bond market still posted a net foreign inflow of RM3.6 bil for the month (December 2019: RM8.1 bil).

Issuance of government bonds started off the year at a fairly robust pace, with RM10.0 bil of MGS and GII coming to the market in January. By contrast, corporate bond issuance was relatively lacklustre amid a seasonally slow month, amounting to only RM4.1 bil.


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Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Registration of Credit Rating Agencies, 2011. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 


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Publication Date Published Category
Bond Market Monthly - February 2020 19-Feb-2020 Bond Market Monthly View PDF