Aggressive US rate hikes dampen appeal of emerging market bonds

Published on 18 Oct 2022.

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Foreign demand for MGS and GII waned in September (net outflows: RM2.5 billion) amid the continued hawkish stance of the US Federal Reserve in raising rates. Year to date, the Fed has raised rates by a total of 300 basis points. The 10-year UST yield jumped 68.0 bps m-o-m to 3.83% as at end-September, outpacing the 10-year MGS yield which rose 45.7 bps to 4.44% as at the same date. Consequently, this has narrowed the differential between MGS and UST yields, reducing the appeal of ringgit bonds for foreign buyers. The rate differential persisted in October, where the UST yields continued to outpace the increase in the MGS yields.

 

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

Media contact Tho Li Ming (603) 3385 2511 liming@ram.com.my

 

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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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