Foreign investors make strong return to Malaysian bonds with largest monthly inflow in a decade

Published on 19 Jun 2025.

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Malaysia’s bond market saw a significant resurgence in foreign investor interest in May, leading to a net inflow of RM13.4 bil – the highest monthly inflow in the 11 years since May 2014 (RM13.5 bil). This also marks the third straight month of foreign buying (April: RM10.2 bil), underscoring continued investor fund reallocation to Malaysia’s fixed income market. The surge in demand was largely driven by improving global sentiment following the easing of US-China tensions, the announcement of a new UK-US trade agreement and rotation out of the US market amid USD decline and growing concerns over US fiscal sustainability. These developments have bolstered the risk appetite for emerging market assets, making MGS a key beneficiary.

In tandem with stronger investor demand, local bond yields moved downwards, with the 10-year MGS yield easing 12.5 bps to settle at 3.56% as at end-May (April: 3.68%). This contrasts against the UST market, where the 10-year UST yield jumped 24 bps m-o-m to 4.41% as at end-May. The spike in UST yields is largely attributable to a market selloff triggered by mounting concerns over an unsustainable US fiscal outlook and the market pricing in a delay in the US Federal Reserve rate cut. 

Despite the strong buying momentum, uncertainties persist particularly surrounding the expiration of a 90-day tariff pause and unresolved US debt ceiling negotiations, which could potentially trigger another broad market selloff. Adding to this cautious outlook, the Fed maintained its rate at 4.25%-4.5% in the June Federal Open Market Committee (FOMC) meeting, signalling a wait-and-see stance as it continues to assess inflation risks even while still projecting two rate cuts by year-end. As of mid-June, markets remained relatively stable, with the ringgit depreciating marginally to 4.25 against the USD as of 18 June from 4.24 at the end of May (end-April: 4.32) and the 10-year MGS yield ticking up slightly to 3.62% on 18 June.

 

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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