MGS and GII yield movements were mixed this week, moving between -4.9 bps to 2.3 bps overall. The 10Y MGS yield initially increased by 4.1 bps to 3.796% on Jan 31, before reaching 3.775% by yesterday (+2.0 bps).
Yields mostly trended rangebound this week, settling somewhat after strong declines following BNM’s recent meeting and as investors cautiously awaited the US FOMC meeting. Demand for bonds was also likely tempered after weaker economic data, with Malaysia’s Manufacturing PMI falling for a fifth consecutive month in January (46.5; Dec: 47.8).
Domestic yields may trend rangebound-to-lower next week, partly tracking lower US bond yields and as markets anticipate
Malaysia’s 4Q22 GDP reading next Friday (Feb 10).
As yields continue to trend lower and auction results have been strong, Kenanga Investment said it reckons that foreign portfolio inflows have returned to the bond market in force. Global risk-on sentiment will likely remain following the Fed’s smaller rate hike and slightly less hawkish tone; as such, it expects foreign inflows to sustain going forward, even more so should the Fed complete its tightening cycle at its next meeting (March 21 – 22).
