KUALA LUMPUR, Dec 6 — Malaysia’s three-year government bonds headed for the worst week since July as increasing signs of a recovery in the US economy added to speculation the Federal Reserve will pare its stimulus as soon as this month.

American manufacturing and payrolls data beat economists’ estimates in November, while jobless claims fell last week to a two-month low, reports this week showed. Malaysia’s planned power price increase may prompt the central bank to raise its policy rate by 50 basis points in the second half of 2014 as inflationary pressures build, according to a December 2 report from Nomura Holdings Inc. The ringgit was little changed this week.

“With the strong US data, taper expectations are hardening,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore. “While one could argue that the pickup in inflation could ease after a year, the power inflation pass- through could be a tad sticky.”

The yield on the 3.172 per cent notes due July 2016 climbed 11 basis points, or 0.11 percentage point, from Nov. 29 to an eight-week high of 3.28 per cent as of 10:06 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The rate on 10- year debt, the most sensitive to the outlook for consumer price increases, rose four basis points to 4.13 per cent, the highest since July.

Tenaga Nasional Bhd., the state-owned power distributor, will raise electricity prices by an average of 15 per cent in Peninsular Malaysia from January 1, Maximus Johnity Ongkili, minister of energy, green technology and water, said December 2. The plan comes on top of a hike in fuel costs in September.

Higher electricity rates may cause a temporary rise in inflation, central bank Governor Zeti Akhtar Aziz said December 3, citing a preliminary assessment from the monetary authority.

Subsidy cuts

“While the electricity price changes add to supply-side pressures that the central bank need not necessarily respond to, we see a risk that second-round effects are larger than expected given other pressures from earlier subsidy cuts,” Euben Paracuelles, Nomura’s Singapore-based economist, wrote in the report.

The ringgit was little changed for the week and strengthened 0.2 per cent today to 3.2222 per dollar in Kuala Lumpur. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose four basis points today to 8.19 per cent.

The currency is also finding support before a government report today that may show a continued recovery in the trade balance, said Jonathan Cavenagh, a Singapore-based foreign- exchange strategist at Westpac Banking Corp.

The trade surplus widened to RM9.2 billion (US$2.9 billion) in October from RM8.7 billion the previous month, the biggest gap in a year, according to the median forecast of economists surveyed by Bloomberg.

A US Labour Department report today may show the unemployment rate dropped to 7.2 per cent last month, matching the lowest level since November 2008, another Bloomberg survey shows. Companies added 185,000 workers to payrolls, less than the 204,000 in October, according to a separate survey. The Fed next meets on December 18. — Bloomberg