Published on 14 Mar 2022.
Foreign investors remained net buyers (RM3.1 bil) in the Malaysian bond market for the third consecutive month in February. The inflow was led by MGS and GII, which totalled RM2.2 bil (January: RM4.3 bil). Foreign holdings climbed to 14.9% of total outstanding bonds, the highest participation rate since April 2018 (15.1%). The foreign inflow continued into February despite the risk-off sentiment and broad flight to safety sparked by the Russia-Ukraine conflict.
While the crisis poses downside economic risk, the US Federal Reserve (Fed) is still expected to commence its rate hike cycle at an upcoming meeting in March. With US personal consumption inflation reaching 6.1% in January - the highest since February 1982 - with no signs of slowing down, the Fed would be pressed to act fast before inflation becomes entrenched and creates a drag on economic growth. As such, bond yields continued to trend broadly upwards, with 10-year UST and MGS yields respectively reaching 1.83% and 3.65% (+4.0 bps and +0.1 bps m-o-m) as of end-February and 2.00% and 3.66% as of 11 March.
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