FOREIGN holdings of Malaysian bonds rose RM279.1 billion in July, the highest since November 2023.

The RM7.8 billion increase from the month before was the also steepest monthly rise in a year, bringing the 7MCY24 total foreign inflow into Malaysian bond market to RM8.7 billion, according to MIDF Research’s fixed income review report released today.

The report added that foreign holdings soared to 22.1% or RM265.4 billion of the total outstanding government bonds in July, the highest in seven months but remained under the pre-pandemic level (2019 average: 23.1%).

At the same time, it noted that the volume of corporate bonds traded fell for the fourth consecutive month.

Traded volume of corporate bonds and Bank Negara Malaysia (BNM) declined to RM13.1 billion in July, marginally lower than RM13.4 billion in the previous month.

Buying interest continued as rated bonds saw yields change between 0bps to -12bps. Similarly, the non-rated securities saw rising buying interest as yields declined, between 2bps to 34bps, it added.

“As the US interest rate outlook becomes clearer, we believe corporate bonds will attract increased attention. This growing interest is likely to be driven by new fund inflows into emerging markets, including the local debt market, in anticipation of narrowing interest differentials once the Federal Reserve begins to lower its rates,” it said. – TMR