The latest 5-year Government Investment Issue (GII) reopening auction has shown impressive results, reflecting robust investor interest despite a smaller-than-anticipated issuance size. The auction, achieved a bid-to-cover (BTC) ratio of 3.683x, indicating strong demand. The issuance size was set at MYR4 billion, lower than market expectations, and notably, no private placement was involved.
Total bids amounted to MYR14.7 billion, marking the highest bid volume since April and the third largest bid volume this year. This heightened interest is attributed to the new benchmark bond’s natural appeal, further boosted by an overnight rally in US Treasury securities (UST). The exceptional demand underscores the attractiveness of 5-7 year GII bonds, which are seen as a sweet spot for carry, appealing to both conventional and Islamic investors.
In the when-issued (WI) market, price discovery was relatively active. The WI initially opened with a wide range of 3.52/48%, but the bid-offer spread narrowed throughout the day, settling at 3.50% before the auction’s close. The final bid-offer spread tightened to 3.505/495%, with the WI ultimately trading at 3.495%. The auction results exceeded market expectations, with the average yield for successful bids at 3.488%, and the cut-off yield slightly lower at 3.494% compared to the last traded WI.
Looking ahead, the next auction will feature a reopening of the 10-year Malaysian Government Securities (MGS) maturing in July 2034. This will replace the existing MGS maturing in November 2033 as the new 10-year benchmark bond. The anticipated auction size is MYR4.5 billion, with no private placement expected.
Source: Maybank
Title: Results: 5y GII Reopening
