Published on 20 Jul 2023.
Foreign investors remained net purchasers of Malaysian bonds for the sixth successive month in June, a surprising show of resilience after the US Federal Reserve (Fed) left interest rates unchanged while hinting at upward revisions to come. The overall foreign funds inflow accelerated further to RM5.2 bil (May: 3.0 bil), led by MGS and GII (RM5.2 bil).
Tracking the UST yields, MGS yields largely trended upwards last month, amid expectation of more US rate hikes. The 10-year MGS and UST yields respectively climbed 13.8 bps and 17.0 bps m-o-m to 3.88% and 3.81% as of end-June. That sentiment however seems to have reversed in 1H July amid fresh hopes that the Fed may end rate hikes sooner than expected. This came on the heels of an encouraging moderation in the US inflation rate in June to 3% last week, the lowest since March 2021. The 10-year MGS yield fell to 3.81% as of 17 July while the ringgit appreciated to 4.56 against the US dollar (end-June: 4.68). With the Fed nearing the end of its rate hike cycle, we expect market sentiment to improve through the rest of this year.
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