MGS and GII yields mostly rose this week, moving between -1.1 bps to 5.1 bps. The 10Y MGS yield rose 4.2 bps to 4.018%, whilst the 3Y MGS fell 1.1 bps to 3.524%.
Domestic yields trended higher this week, steered by elevated global bond yields, but were restrained by BNM’s MPC meeting. The central bank kept the OPR at 2.75%, highlighting the favourable progress of China’s reopening and the potential for robust domestic growth. Meanwhile, the bond market saw strong foreign inflows in February (RM4.3b; Jan: RM0.5b), although it may have been tempered by the hawkish Fed towards the end of the month.
Domestic yields may trend slightly higher next week, driven by volatility among US Treasuries. Attention will also be on Malaysia’s IPI for January (KIBB estimate: 1.5%; Jan: 3.0%), which may have weakened amid poor external demand. Persistently hawkish signals by the Fed, driven by strong US economic data and inflationary pressures, may lead
to heightened risk aversion among foreign investors and weigh on domestic bonds in the near term.
That said, foreign inflows could still chart a more stable recovery from 2Q23, but this would require a clear signal from the Fed regarding the end of its tightening cycle
