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Mideast tensions could dampen foreign investor demand in October

Published on 17 Oct 2024.

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MGS yields trended upwards in 1H October, climbing to 3.79% as of 16 October following a slight dip the previous month (end-Sep: 3.72%; end-August 3.77%). Despite the improvement in MGS yields, the negative yield differential between 10-year UST and MGS widened to 23.1 bps as of 16 October (end-Sep: -9.5 bps) owing to a notable jump in the 10-year UST yield (16 October: 4.02%; end-Sep: 3.81%). The surge is attributable to a sudden flight to safety, triggered by an escalation in Iran-Israel hostility earlier in the month which sparked fears of a full-blown conflict in the region. The ringgit and other regional currencies also took a hit, registering broad-based depreciation in 1H October. The ringgit sat at 4.30 against the greenback as of 16 October compared to 4.11 on 30 September.

Should tensions remain high and investors retain risk-off sentiments, foreign investor demand for Malaysian bonds may be slightly muted in the near term. The net foreign inflow in September moderated to RM1.0 bil from RM9.0 bil the previous month, largely due to a small RM0.7 bil outflow of MGS (August 2024: net inflow of RM6.2 bil). The RM2.0 bil inflow of MTB and MITB and RM0.3 bil of GII helped keep the overall foreign bond flow in positive territory in September.

 

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Publication Date Published Category
Bond Market Monthly - October 2024 17-Oct-2024 Bond Market Monthly View PDF

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