29 minutes
PETALING JAYA: Foreign holdings of Malaysian bonds declined RM2.3 billion in January, the third consecutive month of outflows, said RAM Ratings.
This was due to a sell-off for both short- and long-term government securities and corporate bonds.
“This has been a consistent trend through the last few months amid lingering global trade and geopolitical uncertainties,” the rating agency said in a statement today.
Nonetheless, it believes that the US Federal Reserve’s shift to a more dovish tone in its monetary policy statement released late January should support investor appetite for Malaysian and emerging market bonds in general.
“It has expressed that it will be more “patient” in future policy decisions, which contrasts against its earlier message of “further gradual increases”. In response to this, the benchmark 10-year MGS (Malaysian Government Securities) yield took a dive earlier this month, falling below the psychological level of 4% on Feb 13”.
On the domestic front, RAM said the private sector issuance was relatively robust in January with a gross issuance value of RM5.8 billion.
For the quasi-government segment, January remained quiet (issuance value of RM100 million), as observed in the last few years, further dampened by the bumped up issuance in Q4 2018.
“We expect this relatively muted trend to persist through the rest of this year, primarily due to the government’s project-rationalisation initiatives and the lengthening of project time lines, which should constrain new debt-raising initiatives,” noted RAM head of research Kristina Fong.
Meanwhile, the rating agency said appetite for government bonds was also very healthy in January, as indicated by the bid-to-cover (BTC) ratios.
“Both the 10-year GII and 7-year MGS achieved very strong BTC ratios of 4.13 and 3.91 times, respectively. The BTC ratio for the slightly larger 5-year GII came in at 1.97 times. Government issuance summed up to RM13 billion for the month (January 2018: RM10.5 billion).”
