Stronger foreign investor interest in May as jitters receded

Published on 18 Jun 2024.

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Foreign investors remained net purchasers of Malaysian bonds for the third consecutive month in May despite uncertainties over the timing of the US Federal Reserve’s (Fed) rate cuts. The overall inflow of foreign funds surged to RM5.5 bil (April: RM581.1 mil), primarily driven by purchases of MGS and GII amounting to RM4.4 bil, as market jitters that had dampened appetite in April receded last month.

Yields of the 10-year UST securities and MGS dropped by a respective 18.0 bps and 7.4 bps m-o-m, reaching 4.51% and 3.91% by the end of May (end-April: 4.69% and 3.99%). However, room for a further decline might be limited in the near term as the Fed reiterated a cautious monetary policy stance at the June Federal Open Market Committee meeting. Citing modest progress towards its 2% inflation target, the US central bank said it was not confident enough to cut rates just yet. Yields may stay elevated for longer, with the Fed’s projection document now indicating just one 25 bps cut for 2024, down from the three signalled in March’s projection. All said, yields should fall over the longer horizon once the rate cut cycle commences. The Fed indicated four rate cuts totalling 100 bps for next year, an increase from its previous expectation of a total 75 bps reduction. The downward trajectory in interest rates provides some comfort to the market that the Fed is moving ever closer to its policy goals.

As of mid-June, the ringgit depreciated marginally to 4.71 against the USD from 4.70 at the end of May (end-April: 4.77), while the 10-year MGS yield stood at 3.88% on 14 June.


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Publication Date Published Category
Bond Market Monthly - June 2024 18-Jun-2024 Bond Market Monthly View PDF