Swift easing of market uncertainty supported strong rebound in foreign inflows into Malaysian bonds in April

Published on 20 May 2025.

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Foreign net buying of Malaysian bonds surged to RM10.2 bil in April (March: RM3.2 bil), marking the second consecutive month of net inflows, despite “Liberation Day” tariffs announced on 2 April 2025. The increase was primarily driven by strong demand for MGS and GII, which attracted RM9.7 bil of inflows (March inflow: RM3.0 bil), as well as MTB and MITB which recorded RM480 mil in inflows – a reversal of the RM252 mil outflow in the previous month. 

The sweeping set of “reciprocal” tariffs announced at the start of last month sparked a sharp surge in market turmoil, with the volatility index published by the Chicago Board Options Exchange – often called the “Fear Index” – rising to a high not seen since the start of the COVID-19 pandemic. Heightened risk aversion contributed to a weakening of the ringgit against the USD in the first week of April, as the local currency swiftly depreciated to 4.50 against the greenback as at 9 April from 4.43 as of end-March. The 10-year UST yield soared to a high 4.48% as at 11 April from 4.23% as at end-March. Market jitters, however, soon subsided amid signs of easing US-China trade tensions. The ringgit rose to 4.32 against the USD as at end-April while the 10-year UST yield retreated to 4.17%.

At its May Federal Open Market Committee meeting, the Fed kept the interest rate unchanged at 4.25%-4.5%, citing persistent inflationary pressures and economic uncertainties stemming from recent tariff implementations. Market expectations for the first rate cut shifted to September, with the probability of rate cut remaining at around 71% for the interim. Adding to yield volatility, Moody’s downgraded the US sovereign credit rating to Aa1 from Aaa on 16 May, citing structural fiscal concerns and the unsustainable trajectory of US debt. This contributed to renewed weakness in US treasuries, triggering another round of repricing of US government debt. The 10-year UST yield jumped to 4.46% as of 19 May, from 4.17% as of end-April, as markets digest the downgrade alongside concerns of reduced foreign appetite for US debt. The selloff pressure was relatively contained within the US as MGS yields largely trended sideways, with the benchmark 10-year MGS yield sitting at 3.64% as at 19 May from 3.68% as of end-April.

 

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

 

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