Government bond yields remained largely stable this week, with a slight upward bias as resilient domestic economic indicators offset easing global inflation concerns, according to Kenanga Research.
The research house said yields for Malaysian Government Securities (MGS) and Government Investment Issues (GII) moved within a narrow range of between -2.4 basis points (bps) and +3.5 bps during the week.
The benchmark 10-year MGS yield increased 3.5 bps to 3.631%, while the 10-year GII yield rose 1.7 bps to 3.618%.
Kenanga Research attributed the mild rise in yields to stronger-than-expected domestic economic data, particularly Malaysia’s export performance, which reinforced expectations of continued growth momentum.
Strong export growth of 45.3% year-on-year in May highlighted resilience in external demand, while Bank Negara Malaysia’s continued focus on ringgit stability helped anchor expectations for sustained foreign investor participation.
Forward-looking indicators also pointed towards stable economic conditions, limiting significant movements in bond markets.
Demand at the latest 20-year MGII auction remained strong, with the bid-to-cover (BTC) ratio reaching 3.14 times, helping to cap further increases in yields.
On the global front, Kenanga Research noted that falling oil prices have gradually shifted investor focus away from inflation concerns towards growth risks.
Brent crude prices have moved closer to pre-conflict levels, reducing concerns over renewed inflation pressures and supporting expectations of a less aggressive global monetary policy environment.
However, global interest rate movements remain influenced by expectations surrounding the US Federal Reserve, particularly ahead of upcoming US labour market data.
The research house said markets will assess whether employment conditions remain strong enough to justify a more hawkish Fed stance, while also monitoring signs of softer labour quality and consumer conditions.
Foreign participation in Malaysia’s government bond market remained positive, with overseas investors recording RM2.7 billion in net inflows last week.
However, equity markets continued to see weak foreign sentiment, with net selling amounting to RM10.7 million.
Looking ahead, investors will monitor upcoming Purchasing Managers’ Index (PMI) and Producer Price Index (PPI) releases, alongside US employment data, for signals on the future path of US monetary policy.
Kenanga Research expects steady domestic demand conditions and continued foreign inflows to support Malaysian bonds.
The house noted that supportive inflows should keep MGS and GII yields stable, with limited directional pressure in the near term.
