Bond Yields Could See Slight Uptrend

MGS and GII yields fell this week, moving between -15.5 bps to -2.1 bps overall. The 10Y MGS yield decreased by
10.8 bps to 3.91%.

Demand for government bonds improved in response to intense market disorder in the US, which saw a rush towards the safety of short-term govvies globally. Likewise, the lower yields may have also been prompted by a weaker IPI print for January (1.8%; Dec: 2.8%), caused by slowing manufacturing output and poor external demand.

Domestic yields may trend rangebound-to-higher next week, as global bond yields potentially rise ahead of the
Fed meeting and some optimism over the stabilisation of the US banking sector. The current banking crisis in the US will further exacerbate global risk-aversion, which was already mounting due to hawkish signals from the Fed, leading to
potential outflows from the domestic bond market in March. Nevertheless, foreign inflows could potentially recover from 2Q23, contingent on the Fed signalling the end of its tightening cycle and the stabilisation of the US financial sector.

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