MGS and GII yield mostly increased last week, moving between -0.3bps to 10.3bps overall. The 10Y MGS yield continued to increase, up by 10.3bps to 4.562%, remaining at its highest level since 2 nd October 2008.
According to Kenanga Investment, demand for domestic bonds remained relatively pressured last week, on higher global bond yields and growing domestic political uncertainty but was likely buoyed by the softer headline inflation reading of 4.5% in September (Aug: 4.7%). As such, the average daily trading volume for government bonds increased to RM2.44b (previous week: 2.16b), with a notable improvement on Friday following the inflation data.
Domestic yields may trend slightly lower this week, following the better-than-expected inflation reading and potentially lower global yields. However, investors will likely remain cautious until the general election next month.
Foreign demand for local bonds may remain pressured in the near-term amid ongoing global risk-off sentiment and in the
lead up to Malaysia’s general election (Nov 19). Demand will also likely be weighed by lower yield differentials, as the 10Y
MGS-UST yield spread continued to decline last week (34.5bps; previous week: 44.1bps).
