Foreign bond purchases improved in October

Published on 24 Nov 2021.

Share Tweet Email

Foreign net purchases of Malaysian bonds rebounded in October despite the broad market selloff over the same period. The overall foreign net inflow accelerated to RM2.9 bil in October from RM0.6 bil the preceding month. This was mainly led by the resurgence in demand for MGS and GII which recorded a net inflow of RM5.4 bil, reversing the net outflow of RM215.7 mil in September.

Selling pressure drove domestic bond yields sharply upwards across the board for the second consecutive month in October as investors continue to price in a prospective US policy rate hike in 2022. Yields on 5-year and 10-year MGS respectively jumped 34 bps and 22 bps m-o-m in October after having surged 24.3 bps and 17.4 bps m-o-m in September. This pushed the benchmark 10-year MGS yield to 3.62% as at end-October, its highest level since June 2019. However, the yield spread between 10-year MGS and UST securities remained wide, hovering around the 200 bps mark. The attractive yield differential is likely to have buoyed foreign interest last month.

The yield uptrend was sustained through November as the Fed announced it would begin trimming asset purchases later this month, confirming market expectations. UST yields were also pressured by stronger than expected US inflation of 6.2% in October, which triggered bets of an earlier start to interest rate normalisation than previously anticipated.

 

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

Media contact Sakinah Ariffin (603) 3385 2505 sakinah@ram.com.my

 

About RAM Rating Services Berhad (RAM Ratings)
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. 

Disclaimer
ALL INFORMATION IS PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND. Although every reasonable care has been taken to ensure the accuracy, completeness and objectivity of the information contained in this Media Release, RAM Ratings makes no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability relating to any losses or damages howsoever suffered by any person arising from any reliance on the views expressed or information in this Media Release. RAM Ratings assumes no obligation to update any information or statement contained herein, save for any information required to be disclosed by law.

Published by RAM Rating Services Berhad
© Copyright 2021 by RAM Rating Services Berhad
All rights reserved. This material may not be published, reproduced, broadcast, rewritten or redistributed without prior permission.