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BusinessToday
05-07-2025
- Business
- BusinessToday
Malaysian Bond Yields Soften Amid Rate Cut Expectation
Malaysian Government Securities and Government Investment Issues yields largely continued their downward drift this week, influenced by market expectations of a rate cut by Bank Negara Malaysia and robust domestic investor demand. Across the curve, yields moved between -6.9 and 0.4 basis points (bps). Notably, the benchmark 10-year MGS dipped by 6.9 bps to 3.454%, while the 10-year GII decreased by 2.0 bps to 3.498%. Kenanga Research noted that the softening of local yields was primarily driven by the market actively pricing in a probable 25 bps rate cut by BNM. Demand for Malaysian bonds was further bolstered by strong auction results, reflecting sustained interest from domestic investors. Improving macroeconomic signals also contributed to positive sentiment, with a rebound in Purchasing Managers' Index data lifting confidence. Renewed optimism surrounding potential Foreign Direct Investment inflows reinforced the growth outlook, and constructive signals from ongoing US tariff talks added to the positive tone. Furthermore, the recent expansion of the Sales and Service Tax, effective July 1 and projected to generate RM10.0 billion annually, underscored Malaysia's fiscal discipline, helping to anchor demand for local bonds. Looking ahead, the house views the 10-year MGS yield to hover near current levels ahead of the upcoming BNM meeting. However, a divergence exists between market expectations and some house views, which anticipate the Overnight Policy Rate to remain unchanged at 3.00%. This contrast suggests that yields may rebound slightly above 3.50%. Despite this potential rebound, demand is expected to remain resilient, particularly if macro indicators continue to improve. Malaysia's relative advantage ahead of the expected resumption of Trump-era tariffs on July 9 may provide additional support for bonds, although persistent external risks continue to warrant caution. Related
BusinessToday
07-06-2025
- Business
- BusinessToday
Local Yields May Trade Lower On US Optimism
Yields on Malaysian government bonds closed mixed this week, with cautious optimism around global trade and soft US economic data helping to anchor the local fixed-income market. According to Kenanga Research, yields on Malaysian Government Securities (MGS) and Government Investment Issues (GII) moved within a narrow range of -4.2 to +0.9 basis points (bps) across the curve. The benchmark 10-year MGS yield eased 1.6 bps to 3.518% The 10-year GII dipped 0.2 bps to 3.532% Global and Domestic Drivers The slight decline in long-term yields closely followed movements in US Treasuries, which reacted to positive signals in US-China trade negotiations. The improved trade outlook, combined with softer US economic data, has reinforced expectations of an earlier rate cut by the US Federal Reserve. On the domestic front, a modest improvement in Malaysia's Purchasing Managers' Index (PMI) and continued export growth to African markets have supported confidence in local bonds, contributing to the relatively stable yield environment. Outlook: Stable Yields with Eyes on US Inflation Kenanga expects local bond yields to remain stable in the near term, with upcoming economic data — including industrial production, retail sales, and labour market statistics — likely to guide investor sentiment. However, the research house cautioned that any upside surprise in US inflation data could prompt global bond yields to rise, potentially spilling over into the Malaysian market. Additionally, renewed uncertainty in US tariff policy could reintroduce volatility. 'Investors should stay alert to both domestic data and global developments, especially updates on tariff talks,' Kenanga stated. Related
