Yields on Malaysian Government Securities (MGS) and Government Investment Issues (GII) trended upward across the curve, rising between 1.8 basis points and 9.6 basis points as weak primary auction demand and holiday-shortened trading hours weighed on market sentiment.
According to a fixed-income report by Kenanga Investment Bank, the 10-year MGS yield climbed 9.6 basis points to settle at 3.859 percent, while the benchmark 10-year GII yield advanced 5.3 basis points to 3.830 percent.
The sell-off in longer-dated papers was primarily triggered by lukewarm interest in the recent 20-year MGS 4/46 reopening auction, which recorded a low bid-to-cover ratio of 1.64 times. Constrained liquidity due to shortened trading sessions around public holidays further dampened domestic buying momentum.
External factors also influenced domestic bond dynamics, with spillovers from higher US Treasury yields and lingering geopolitical uncertainty surrounding US-Iran developments exerting additional upward pressure on local yields. Lower global oil prices provided a partial offset to these external headwinds.
Despite the upward move in sovereign yields, foreign capital flows showed a clear divergence across asset classes:
Foreign investors expanded their holdings of Malaysian bonds by RM3.6 billion, providing a layer of baseline support for local fixed-income assets.
Foreign institutional investors recorded net outflows of RM549.1 million from the local stock market.
Kenanga projects MGS yields to trade in a rangebound pattern in the near term, anchored by resilient macroeconomic fundamentals and expectations that Bank Negara Malaysia will maintain a stable policy rate.
On the domestic front, investors are focusing on incoming economic indicators, including Producer Price Index data and upcoming Purchasing Managers’ Index figures, for further clues on Malaysia’s economic trajectory. Internationally, global interest rate movements will continue to be guided by key US labor statistics, Federal Reserve policy signals, and energy market developments linked to US-Iran relations.
