Foreign holdings of M’sian bonds down RM2b


Foreign holdings of Malaysian bonds continued to record outflows for the third consecutive month as it declined RM2.3 billion in January due to a sell-off for both short- and long-term government securities and corporate bonds.

RAM Rating Services Bhd head of research Kristina Fong (picture) said this has been a consistent trend over the past few months amid lingering global trade and geopolitical uncertainties.

“That said, the US Federal Reserve’s (Fed) shift to a more dovish tone in its monetary policy statement (released in late January) should support investor appetite for Malaysian and emerging-market bonds in general.

“It (the Fed) has expressed that it will be more ‘patient’ in future policy decisions, which is in contrast to its earlier message of ‘further gradual increases’,” she said in a statement yesterday.

Subsequently, Fong said the benchmark 10-year Malaysian Government Securities (MGS) yield took a dive earlier this month, falling below the psychological level of 4% on Feb 13.

On the domestic front, she said private sector issuance was relatively robust in January with RM5.8 billion of gross issuance value.

“For the quasi-government segment, January remained quiet (with issuance value of RM100 million) as observed in the last few years, further dampened by the bumped up issuance in the fourth quarter of 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 timelines, which should constrain new debt-raising initiatives,” she said.

Fong added that the appetite for government bonds was also very healthy last month, as indicated by the bid-to-cover (BTC) ratios.

“Both the 10-year Government Investment Issue (GII) and seven- year MGS achieved very strong BTC ratios of 4.13 times and 3.91 times respectively.

“The BTC ratio for the slightly larger five-year GII came in at 1.97 times. Government issuance summed up to RM13 billion for the month (January 2018: RM10.5 billion),” she said.