The domestic financial markets remain orderly despite a weaker ringgit and higher government bond yields in September, as global markets adjust to higher US interest rates and rising Treasury yields, Bank Negara Malaysia’s (BNM) Financial Markets Committee (FMC) said.
Following its Sept 21 meeting, the FMC said expectations of higher US rates and the Federal Reserve’s latest rate increase had strengthened the US dollar and pushed US Treasury yields higher, triggering broad adjustments across regional currencies and bond markets.
The ringgit, which had been relatively stable in July and August, moderated in September, while Malaysian Government Securities (MGS) yields also rose after an extended period of stability.
Nevertheless, the committee said balanced two-way flows continued to support effective price discovery, while conditions remained conducive for companies to raise financing. Corporate bond issuance interest and hedging activity also remained robust.
The FMC highlighted Malaysia’s economic fundamentals, noting that second-quarter 2026 GDP expanded 6.0% year-on-year, above market expectations of 5.8%.
It also pointed to continued foreign direct investment interest and inflows into services-related activities, particularly artificial intelligence and data centres.
Looking ahead, the committee identified geopolitical uncertainties, oil-price volatility and the evolving global interest-rate environment as near-term risks.
However, higher domestic bond yields could offer more attractive entry points for foreign investors, while measures including the Qualified Resident Investor programme and efforts to encourage GLCs, GLICs and corporates to repatriate and convert foreign-currency income are expected to support the foreign-exchange and bond markets.
The FMC also noted that Malaysia is approaching an important benchmark-reform milestone on Oct 1, 2026, when market participants are expected to be ready to offer and trade products referencing the Malaysia Overnight Rate (MYOR) and MYOR-i.
Progress includes standardised conventions for MYOR derivatives, Bloomberg Overnight Index Swap curves and calculators, and work on market conventions and fallback arrangements for loans, capital-market instruments and investment products.
BNM said further work is also underway to improve liquidity in Islamic profit-rate swaps and strengthen adoption of MYOR-i across the Islamic financial market.
