Both government bond yields extended their upward trend this week as investors reacted to developments in the United States and ongoing geopolitical tensions in the Middle East, according to Kenanga Research.
The research house said MGS and GII yields rose between 0.5 basis points (bps) and 10.3bps during the week, mirroring movements in global bond markets.
The benchmark 10-year MGS yield increased 2.6bps to 3.714%, while the 10-year GII yield climbed 4.4bps to 3.709%.
Kenanga said domestic bond yields moved higher after the US Treasury yield curve steepened following the US Federal Reserve’s decision to keep interest rates unchanged in a closely watched 9-3 split vote.
Although the Federal Reserve left policy rates unchanged, investors demanded higher compensation for holding longer-term bonds, pushing Treasury yields higher despite softer US economic data.
The research house noted that the increase in global yields spilled over into Malaysia’s fixed-income market.
Domestically, investor sentiment remained supported by Bank Negara Malaysia (BNM) Governor Datuk Abdul Rasheed Ghaffour’s assessment that the Malaysian economy is likely to expand towards the upper end of the central bank’s official growth forecast for the year.
Kenanga said foreign investors remained net buyers of Malaysian government bonds last week, recording RM600 million in net inflows, signalling continued confidence in the country’s fixed-income market.
In contrast, foreign investors turned net sellers of Malaysian equities, with RM134.3 million in net outflows during the same period.
Looking ahead, Kenanga expects Malaysian bond yields to remain largely range-bound as investors continue monitoring geopolitical developments and upcoming economic data.
The research house said any escalation of tensions in the Middle East could push global oil prices higher, raising inflation expectations and putting upward pressure on bond yields worldwide.
At the same time, markets will closely watch the upcoming US labour market report for fresh indications on the Federal Reserve’s interest rate outlook.
On the domestic front, Malaysia’s Purchasing Managers’ Index (PMI) will also be monitored for signs of economic momentum and its potential impact on local financial markets.
