MGS and GII yields mostly decreased this week, moving between -5.9 bps to 3.5 bps overall. The 10Y MGS yield fell by 2.8 bps to 3.851%, whilst the 3Y MGS yield decreased by 4.2 bps to 3.460%.
Domestic bonds were steered by a decline in global bond yields early in the week and demand remained relatively solid
for the 20Y GII auction. That said, daily trading volume declined significantly this week so far at RM2.4b, compared to
the surge in daily volume last week of RM4.3b. Kenanga says it expects domestic bond yields to trend slightly higher next week, driven by external catalysts in the US. Attention will be on the conclusion of the Jackson Hole Symposium for further signals over the Fed’s policy direction, as well as next week’s release of the US PCE price index and non-farm payrolls.
Foreign interest in domestic bonds is expected to remain robust throughout the remainder of the year despite cautious
sentiment in global bond markets. Malaysia bonds should benefit from improved political stability after the local state elections and the increasing likelihood that major central banks have concluded their tightening cycles. Likewise, the house says it foresees further foreign portfolio outflows from China will continue to be directed towards Malaysia and the broader Emerging Asia region
