Lacklustre interest in local currency EM bonds

Published on 17 Nov 2022.

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Lofty US interest rates continue to sideline demand for local currency EM bonds. Given the tight average spread of just 46 bps between MGS and UST yields in October, foreign investors continue to trim their ringgit bond holdings. Total net outflow surged to RM6.3 bil (September: RM0.4 bil) – the biggest monthly outflow since March 2020. Similarly, last month’s government bond auctions also drew scant interest. All three MGS and GII tenders registered bid-to-cover ratios of less than 2 times, less than the average of around 2.3 times so far in 2022.

With recent US data and the Fed Chair hinting at a slower pace of tightening moving ahead, we expect foreign buying of ringgit bonds to progressively normalise next year.

 

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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