Malaysian Government Securities (MGS) and Government Investment Issues (GII) yields were mixed, with investors remaining cautious amid uneven domestic economic data and continued uncertainty over global interest rates, according to Kenanga Investment Bank Research.
Yields across the MGS and GII curve moved between 0.5 basis points lower and 7.5 basis points higher, while the benchmark 10-year MGS yield rose 2.1 basis points to 3.743%.
The 10-year GII yield similarly increased 2.0 basis points to 3.743%.
Kenanga said domestic yields edged higher as investors adopted a cautious stance amid mixed economic indicators and persistent uncertainty surrounding global rates.
The reopening of the 30-year MGS 7/55 attracted moderate demand, recording a bid-to-cover ratio of 2.02 times.
However, softer distributive trade sales and industrial production growth added to investor caution and limited the appetite for local bonds.
Global developments also continued to influence sentiment in the domestic bond market.
Kenanga said stalled ceasefire talks between the United States and Iran have renewed concerns over potential disruptions to global oil supplies, which could put renewed pressure on energy prices and inflation.
Higher oil prices could complicate the global interest rate outlook by keeping inflationary pressures elevated.
At the same time, softer US labour market and inflation data have reduced expectations of further Federal Reserve tightening, helping to limit upward pressure on Malaysian government bond yields.
Foreign investors remained net buyers of Malaysian government bonds last week, recording RM1.9 billion in net inflows, according to Kenanga.
In contrast, foreign investors turned net sellers of Malaysian equities, registering RM437.3 million in net outflows.
The continued foreign demand for government bonds provides some support for the local fixed-income market despite the broader uncertainty surrounding global rates.
Looking ahead, Kenanga expects domestic government bond yields to remain range-bound, supported by a firmer second-quarter 2026 economic growth performance and reduced expectations of further US rate hikes.
Kenanga expects Malaysia’s final 2Q26 GDP growth to come in at 5.9%, slightly above the consensus estimate of 5.8%.
Despite the relatively supportive domestic backdrop, Kenanga cautioned that volatility in global interest rates remains a key risk for Malaysian bonds.
Ongoing US fiscal pressures, increased Treasury supply and elevated real yields at the longer end of the US Treasury curve could continue to weigh on US government bonds and influence global fixed-income markets.
Domestically, investors will be monitoring upcoming trade and inflation data for further indications of the direction of Malaysian interest rates and bond yields.
Overall, Kenanga expects local yields to remain relatively stable in the near term, with domestic economic resilience and easing expectations for further Fed tightening providing some offset to global rates and geopolitical risks.
