Foreign Appetite For Local Bonds Dulled By Fading Rate Cut Expectations

Foreign investors remained net buyers of Malaysian bonds for the second consecutive month in April 2024, although the pace of the fund inflow was milder at RM0.6 billion (March: RM1.7 billion). The decline was primarily driven by MGS and GII which recorded a smaller net inflow of RM1.2 bil (March: RM2.2 bil).

RAM ratings noted, foreign investment were dulled by fading prospects of a policy rate cut by the US Federal Reserve (Fed) in the near term as its battle with inflation persists for longer than initially expected.

At the latest Federal Open Market Committee meeting in May, the Fed kept the interest rate unchanged while also acknowledging strong US economic data and stickier than anticipated inflation. This sentiment continues to drive market movements this month, which have nevertheless subsided somewhat compared to April. The 10-year UST and MGS yields stood at 4.42% and 3.88%, respectively, as of 17 May – down from 4.69% and 3.99% as of end-April (end-March: 4.20% and 3.88%). Receding investor jitters also helped push the value of the ringgit up to 4.69 against the US dollar as of the same date (end-April: 4.77).

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