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Foreign holdings of Malaysian bonds up RM4.5b in February

The Edge logoThe Edge 18/3/2019 Adam Aziz
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KUALA LUMPUR (March 18): Foreign holdings of Malaysian bonds surged by RM4.5 billion in February to break a three-month streak of outflows, said RAM Rating Services Bhd.

During that month, the Malaysian bond market enjoyed renewed foreign interest alongside other emerging markets, largely attributable to the US Federal Reserve's dovish stance highlighted in its Jan 30 monetary policy statement, RAM said in a statement today.

"Portfolio outflow pressures have been somewhat reduced by the Fed's more dovish tone and, more recently, the growth concerns expressed by the European Central Bank and the subsequent pause in elevating policy rates," said RAM's head of research Kristina Fong.

"However, there may still be a flight to safety, especially as the US-China trade spat and Brexit dynamics have yet to be resolved," Fong said.

In February, government bond issuance amounted to RM8 billion, compared with RM13 billion in January.

"The 10-year MGS (Malaysian Government Securities) and 15-year Government Investment Issues in February achieved very strong bid-to-cover ratios of 2.54 and 3.91 times, respectively," said the statement.

"Issuance of corporate bonds summed up to RM9.1 billion for the month from RM5.8 billion in January, backed by healthy issuance from both the quasi-government and private sectors," it added.

Concurrently, yields to maturity of government and corporate bonds have declined on-month across the rating spectrum.

The yield of the benchmark 10-year MGS dived in the first half of February, falling below the psychological level of 4.0% on Feb 13, 2019 — the first time since April 11, 2018.

Moving forward, yields are expected to face some further downward pressure as the market is also considering the prospects of an Overnight Policy Rate cut by Bank Negara Malaysia, following the central bank's more cautious tone in its latest monetary policy statement.

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