KUALA LUMPUR, Aug 19 — Regional bond markets have seen a recent resurgence of foreign interest as sentiments improve on the resumption of economic activities, coupled with ample global liquidity from quantitative easing, RAM Rating Services Bhd said.
The rating agency said Malaysian bonds have been popular, charting their third consecutive net foreign inflow in July (+RM7.1 billion).
“The consistent inflow had largely offset panic selling during the height of the pandemic, with the year-to-date net inflow currently standing at RM1.3 billion.
“Consequently, foreign holdings of the Malaysian Government Securities/Government (MGS) Investment Issue rose to 23.5 per cent of the total outstanding in July, close to the 23.9 per cent in February — pre-Covid-19,” it said in a statement.
In contrast, the participation rate in Thailand and Indonesia stayed on a downtrend despite seeing a consistent return of foreign demand.
In line with robust foreign demand, yields trended down through July.
RAM also said this broadbased decline was also driven by the Bank Negara Malaysia’s fourth overnight rate policy (OPR) cut this year, for a total of 125 basis points (bps) year to date to 1.75 per cent — the lowest since the introduction of this policy tool in 2004.
Concurrently, the benchmark 10-year MGS yield fell to a record low of 2.62 per cent as at end-July (-32.2 bps m-o-m) while the shorter-term one-year MGS hit a fresh low of 1.78 per cent (-26.9 bps m-o-m).
“Looking ahead, we expect domestic bond yields to stay suppressed amid the abundance of global liquidity and not discounting another round of OPR cuts by the central bank. We think OPR could possibly end 2020 at 1.50 per cent,” it added. — Bernama