KUALA LUMPUR, July 19 — RAM Ratings Services Bhd projects the Malaysian bond market to likely gain support in July with a “stronger chance” of the United States (US) Federal Reserve (US Fed) cutting interest rates.
It said foreign holdings of Malaysian bonds fell by RM576.8 million in June (May: net inflow of RM5.5 billion), led by a selloff of RM2.6 billion of Malaysia Government Securities (MGS).
"The decline in MGS holdings was likely a result of a lack of rollover options, given a large negative net issuance amid lumpy maturities last month (matured: RM21.5 billion; net issuance: RM16.5 billion).
"Foreign buying of Government Investment issue continued in June (RM1.4 billion), as did purchases of short-term Malaysian Treasury Bills and Malaysian Islamic Treasury Bills (RM1.2 billion)," RAM Ratings said in a statement today.
The bond market could “enjoy further attention” in July as a softer-than-expected US inflation print and dovish remarks by the US Fed chair Jerome Powell on Monday (July 15) convinced markets that the US Fed would cut interest rates in September.
"The market-assigned probability of a rate cut in September surged to 97 per cent on July 18 from about 64 per cent as of end-June, according to CME FedWatch Tool data," the firm added.
Yields of 10-year UST securities and MGS dropped by a respective 15.0 basis points (bps) and 3.2 bps month-on-month, reaching 4.36 per cent and 3.88 per cent by the end of June (end-May: 4.51 per cent and 3.91 per cent).
The ringgit appreciated to 4.67 against the US dollar on July 18 (end-June: 4.72) while 10-year UST and MGS yields eased further at 4.20 per cent and 3.83 per cent, respectively.
— Bernama
