Persistent bond market outflow in January as Fed keeps tone hawkish

Published on 21 Feb 2024.

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The foreign fund outflow from the bond market intensified in January 2024, the second consecutive month of net foreign selling. The overall net outflow amounted to RM5.1 bil (December 2023: RM2.1 bil), mainly driven by MGS and GII (RM2.5 bil) and MTB and MITB (RM2.5 bil). This follows the US Federal Reserve’s (Fed) comments after the January Federal Open Market Committee meeting that it is not ready to start cutting rates soon, shooting down the possibility of a rate cut in March. This caused rate cut bets to be sharply pared back as the hawkish statements revived concerns that interest rates may stay higher and for longer than expected.

The bond selloff saw the benchmark 10-year MGS and UST yields respectively rising 7.2 bps and 11.0 bps m-o-m to 3.81% and 3.99% as of end-January. Bond yields continued to rise in in the first half of this month, standing at 3.88% and 4.27%, respectively, as at 20 February. Amid weak market sentiment and foreign selling pressure, the ringgit depreciated to 4.73 against the US dollar as at end-January (end-December: 4.60) before falling further to 4.79 on 20 February.

 

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

Media contact Sakinah Arifin (603) 3385 2500 sakinah@ram.com.my

 

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