March bond market inflows likely to have reversed in April

Published on 23 Apr 2025.

Share Tweet Email

The rebound in foreign investor interest in the Malaysian bond market in March is likely to have been short-lived, given heightened risk aversion triggered by increased economic uncertainty over US reciprocal tariffs. Foreign buying rebounded last month, with an overall net foreign inflow of RM3.2 bil (February: net outflow of RM1.1 bil), underpinned by easing US inflation data and a dovish Federal Reserve (Fed). Notably, the average UST-MGS yield differential narrowed slightly to 49.3 bps in March from an average of 62.6 bps a month earlier, reflecting global investors’ growing anticipation of Fed easing and repositioning towards emerging market (EM) debt.

That said, the reciprocal tariffs launched at the start of this month have amplified “risk-off” sentiment among investors. This is likely to have triggered investor flight-to-safety and reallocation of capital away from EMs, including Malaysia. The foreign funds outflow already contributed to the weakening of the ringgit against the USD in the first week of the month, as the local currency swiftly depreciated to 4.50 against the greenback as at 9 April from 4.43 as of end-March. However, USD weakness from the US bond rout saw the ringgit picking up to 4.38 on 22 April. 

A violent US Treasury bonds selloff in the second and third week of April sent UST yields soaring, with the 10-year benchmark yield jumping to 4.48% as of 11 April before moderating to 4.41% on 22 April, albeit still elevated compared to 4.23% as of end-March. In comparison, 10-year MGS yields have trended largely downward, sitting at 3.70% as of 22 April (end-March: 3.80%). 

Barring a quick unwinding of the trade war, a return of the foreign funds inflow into MGS is highly unlikely this month. Foreign investor appetite will remain sluggish as risk aversion stays high in the near term. Investors will likely prefer to keep to the sidelines while awaiting more clarity in the current highly dynamic and fast evolving economic and financial market landscape.

 

Analytical contact Woon Khai Jhek, CFA  (603) 2708 8286 khaijhek@ram.com.my		Media contact Sakinah Arifin (603) 2708 8212 sakinah@ram.com.my
Nur Rasyidah Abd Karim (603) 2708 8208 rasyidah@ram.com.my

 

About RAM Rating Services Berhad (RAM Ratings)

Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Credit Rating Agencies. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 

Disclaimer

ALL INFORMATION IS PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND. Although every reasonable care has been taken to ensure the accuracy, completeness and objectivity of the information contained in this Media Release, RAM Ratings makes no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability relating to any losses or damages howsoever suffered by any person arising from any reliance on the views expressed or information in this Media Release. RAM Ratings assumes no obligation to update any information or statement contained herein, save for any information required to be disclosed by law.

Published by RAM Rating Services Berhad
© Copyright 2025 by RAM Rating Services Berhad
All rights reserved. This material may not be published, reproduced, broadcast, rewritten or redistributed without prior permission.