Foreign investors returned strongly to Malaysia’s bond market in August, recording net inflows of RM15.9 billion, the largest monthly inflow since September 2013, according to RAM Ratings.
The sharp rebound followed net outflows of RM5.6 billion in July, supported by strong demand for Malaysian government bonds and record foreign purchases of corporate debt.
In its latest bond market commentary, RAM Ratings said Malaysian Government Securities (MGS) and Government Investment Issues (GII) attracted combined net foreign purchases of RM10.6 billion, the largest monthly inflow into the segment since May 2025.
Foreign investors also purchased a net RM4.8 billion of corporate bonds in August, marking a record monthly inflow and extending the segment’s net buying streak to six consecutive months.
RAM attributed the sustained foreign interest to Malaysia’s relatively stable macroeconomic fundamentals and attractive bond yields, despite uncertainties surrounding global monetary policy and rising government borrowing costs in major economies.
Despite the strong foreign inflows, Malaysian bond yields increased in August, reflecting upward pressure from global markets.
The benchmark 10-year MGS yield rose to 3.91% at end-August from 3.75% at end-July, while the three-year MGS yield increased to 3.42% from 3.35%.
The larger increase in longer-term yields resulted in a steeper yield curve, suggesting that investors were becoming more cautious about holding bonds with longer maturities.
Bond yields faced further pressure in September after the US Federal Reserve raised interest rates by 25 basis points to a range of 3.75% to 4.00%.
The Fed’s continued focus on inflation and resilient economic activity reinforced expectations that US interest rates could remain elevated for longer.
Around mid-September, the 10-year MGS yield climbed above 4.2%, while the corresponding US Treasury yield surpassed 5%.
Both subsequently eased, with the Malaysian benchmark yield retreating to 3.94% and the US Treasury yield to 4.96% as at Sept 22.
RAM Ratings said foreign demand for Malaysian bonds remained positive in September, with investors recording net purchases of RM3.5 billion during the first 17 days of the month.
Looking ahead, the agency expects upcoming US inflation and employment data to influence global bond market movements and expectations surrounding the Fed’s October and December policy meetings.
Persistent inflation or continued strength in the US labour market could reinforce expectations of another interest rate increase, keeping upward pressure on global bond yields.
Nevertheless, RAM expects Malaysia’s resilient domestic economic fundamentals to continue supporting foreign investor interest in the local fixed-income market.
