Published on 19 Apr 2023.
The bond market enjoyed some reprieve in March as the US Federal Reserve (Fed) hinted that interest rate hikes are nearing an end, albeit reiterating its commitment to bringing inflation down to its 2% target. This renewed interest towards emerging markets, with Malaysia registering an increased overall net foreign inflow of RM6.6 bil (February: RM4.3 bil), the largest m-o-m uptick in foreign holdings since December 2021. Foreign buying of MGS and GII continued for the fifth straight month (March: RM6.6 bil; February: RM5.0 bil) and was the largest contributor to the overall foreign inflow in March.
Consistent with the more dovish Fed and stronger investor demand, bond yields showed a broad-based decline in March. The benchmark 10-year UST and MGS yields respectively decreased 44 bps and 3.5 bps m-o-m to 3.48% and 3.92% as of end-March, before trending largely sideways in early April (18 April - UST: 3.58%; MGS: 3.91%). Due to the sharper fall in UST yields, the 10-year MGS-UST yield spread widened to a high of 59.8 bps on 5 April before moderating to 32.5 bps on 18 April (average spread – February:13.2 bps; March: 29.7 bps).
Woon Khai Jhek, CFA
(603) 3385 2512
Hazli Halini Johari
(603) 3385 2542
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