MGS and GII yield movements were mixed this week, ranging between -6.5 bps to 7.4 bps overall. The 10Y MGS yield initially rose by 4.8 bps to 4.108% on Dec 13, before falling to 4.007% (-5.3 bps).
Local bonds mostly tracked volatile global bond yields ahead of the last US FOMC meeting of the year. As a result, domestic yields initially increased at the beginning of the week, before returning to a downtrend by Dec 14. Yields may trend rangebound next week with less volatility, as markets settle after the smaller US Fed rate hike. Research house Kenanga now expects the 10Y MGS yield to close 2022 at 4.05% compared to its previous estimate of 4.25%, mainly due to expectations of markedly lower US Treasury yields.
Foreign demand for Malaysian bonds may remain slightly pressured in the near term despite the easing of political risk,
largely due to the US Fed’s recent 50 bps rate hike and signals of more to come. Then again, there is a possibility that the foreign inflows to chart a strong recovery by 2Q23 as most major central banks likely conclude their tightening cycles.
