KUALA LUMPUR: Bank Negara Malaysia’s move to lower the overnight policy rate by 25 basis points (bps) to 3.00 per cent should be positive for the country’s bond market, said AmBank Research in a note.
“We foresee the 10-year Malaysian Government Securities (MGS) hovering around 3.70 per cent –3.75 per cent.
“Looking at the issuances of the MGS and Government Investment Issues (GII) in the primary market, at the gross level, we expect it to be around RM120 billion and RM125 billion, respectively,” said the research firm yesterday.
The total amount of MGS/GII that will come into maturity in 2019 is RM69.1 billion.
As at end-April, the total amount of MGS/GII matured is RM17.7 billion, which means the balance that will come into maturity for the remaining months of the year is RM51.4 billion.
“As for Malaysian ringgit corporate bonds and sukuks, we project a total issuance of RM80–RM85 billion in 2019.
“As at end-April, with RM35.5 billion issued, we estimate a balance of RM44.5 billion to RM49.5 billion to be issued in the remaining months of the year,” the research firm said.
However, Ambank Research said the local bond market in April saw a sell-off across the curve with bond yields rising two to seven bps.
During the month, the Malaysian ringgit fell by 1.3 per cent month-on-month and 5.4 per cent year-on-year to end at 4.135 while on a monthly average, it slid 0.9 per cent month-on-month and 5.84 per cent year-on-year to 4.114.
“The selling pressure was due to a slew of negative headlines such as the Norwegian sovereign fund exiting from emerging market bonds and the announcement by the FTSE Russell to place Malaysia on the watch list for a potential disqualification from its flagship World Government Bond Index;
“Finally, negative news was from international rating agency Moody’s commenting that Malaysia risked falling into “negative credit”,” it said.
As a result, AmBank Research said foreigners turned net sellers after two consecutive months of inflows with April’s total ringgit debt flows recording a net outflow of RM9.8 billion or 12.8 per cent of total ringgit debt outstanding.
Outflows came from both the MGS and GII, each reporting RM3.5 billion respectively. – Bernama
