Foreign investors remained net buyers of MGS and GII for the third consecutive month in January (RM2.7 bil). The strong and sustained foreign buying came amid a softer US Federal Reserve (Fed) messaging on further rate hikes. The overall fund inflow into ringgit bonds (RM498.3 mil) was however moderated by outflows in shorter-term MTB and MITB said RAM.
The healthy investor sentiment seems to have reversed course in February. Strong US economic data continue to fuel the Fed’s defensive mode, pushing back investors’ bets that the Fed will stop hiking rates in the near term. The bond selloff caused the 10-year UST yield to surge to 3.82% as of 17 February after touching 3.52% at end-January. The benchmark 10-year MGS yield tracked this development with a quick climb back to 3.93% as of 17 February, after having shed 23.9 bps m-o-m to 3.83% as at end-January.
With the Fed holding on to its hawkish stance, the next weeks may see bond yields staying elevated as foreign investors remain on the sidelines, although local investor appetite should still be strong.
