Malaysian government bond yields declined across the curve last week as foreign investors channelled RM2.7 billion into the domestic bond market, supported by confidence in Malaysia’s growth and investment outlook, according to Kenanga Research.
In its latest fixed-income market report, Kenanga said yields on Malaysian Government Securities (MGS) and Government Investment Issues (GII) fell between 5.1 and 19.3 basis points.
The benchmark 10-year MGS yield declined 17.4 basis points to 3.952%, while the 10-year GII yield eased 16.6 basis points to 3.956%.
Kenanga attributed the stronger demand for Malaysian bonds partly to improving investment prospects, including the proposed extension of the East Coast Rail Link (ECRL) to Rantau Panjang and Malaysia’s continued openness to Chinese investments in digital technology and strategic sectors.
The research house said these developments reinforced expectations of stronger regional connectivity and longer-term economic benefits.
Tourism-related activities also supported the domestic outlook, with deeper cooperation involving the United Arab Emirates and Gulf Cooperation Council countries expected to boost visitor arrivals.
Kenanga noted that foreign investors also recorded RM127 million in net purchases of Malaysian equities last week, ending a six-week selling streak.
The return of foreign inflows into both bonds and equities reflected improving investor sentiment, supported partly by the extension of the US-China trade truce and ongoing US-Iran negotiations.
Looking ahead, Kenanga expects MGS yields to remain broadly stable and range-bound as investors assess upcoming Malaysian economic data and policy signals ahead of Budget 2027 on Oct 9.
Domestic attention will focus on the Producer Price Index (PPI) and Purchasing Managers’ Index (PMI), while US employment and inflation data will remain important drivers of global bond market sentiment.
However, Kenanga cautioned that the widening yield differential between Malaysian government bonds and US Treasuries remains a key risk.
A reversal in foreign fund flows could place renewed upward pressure on Malaysian bond yields.
