Published on 16 Mar 2021.
February saw a spike in the long end of global yields. At the epicentre of this surge was the US Treasury market - the 10-year yield rose 33 bps m-o-m to 1.44% as at end-February, with the momentum continuing in early March. This represents the biggest m-o-m rise since November 2016. The yield spike was mainly triggered by rising inflation expectations due to the prospects of an earlier economic recovery amid swift global vaccinations.
Regional yields surged in tandem last month. The 10-year MGS yield rose 39.5 bps to 3.07% as at end-February, as did corresponding yields for Thailand and Indonesia that spiked a respective 43.0 and 34.1 bps m-o-m.
Despite the sharp spike in MGS yields, foreign appetite continued to strengthen in February, the tenth successive month of net foreign purchases. Net foreign inflow advanced to RM7.2 bil in February, from RM3.7 bil a month earlier. These were led by purchases of MGS and GII, which summed up to RM5.6 bil (January: RM3.1 bil). At the same time, demand for short-term government papers (MTB and MITB) also accelerated, with a net inflow of RM1.2 bil (January: RM0.4 bil). Looking ahead, uncertainties leading up to FTSE Russell’s announcement (expected on 29 March) on Malaysia’s status in the World Government Bond Index (WGBI) may curb foreign appetite in March.
Woon Khai Jhek, CFA
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