KUALA LUMPUR, February 13 — The yield on Malaysia’s 10-year sovereign bonds fell from the highest level this week after the nation reported the smallest fiscal deficit since 2007.

The budget shortfall narrowed to 3.9 per cent of gross domestic product last year from 4.5 per cent in 2012, according to the central bank’s quarterly bulletin that cited finance ministry data. The current-account surplus widened to RM16.2 billion (US$4.9 billion) in the last three months of 2013, the most in four quarters, according to a government report yesterday. Foreign reserves were at US$133.1 billion (RM442.4 billion) as of January 30, compared with US$101 billion in Indonesia.

“What Malaysia has going for it is the still decent reserves plus the still-positive current account,” said Nizam Idris, head of strategy for fixed income and currencies in Singapore at Macquarie Bank Ltd.

The yield on the 4.181 per cent notes due July 2024 dropped one basis point, or 0.01 percentage point, to 4.16 per cent, according to data compiled by Bloomberg. It reached 4.17 per cent yesterday, the highest since February 7.

The government sold RM2.5 billion of 2030 debt at a yield of 4.655 per cent today, central bank data showed. Demand exceeded the amount on offer by 2.29 times.

Default swaps

Malaysia’s gross domestic product rose 5.1 per cent in the three months through December 31 from a year earlier, the fastest pace in a year, the central bank reported yesterday. Full-year 2013 growth slowed to 4.7 per cent from 5.6 per cent in 2012.

The ringgit was unchanged from yesterday at 3.3225 per dollar, according to data compiled by Bloomberg. It has lost 1.4 per cent this year, the third-worst worst performance after Taiwan’s dollar and the South Korean won among Asia’s 11 most-traded currencies.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose three basis points, or 0.03 percentage point, to 6.63 per cent.

Five-year credit-default swaps climbed one basis point to 110 in New York, halting a seven-day decline, according to data provider CMA. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. — Bloomberg