Renewed foreign interest seen in M’sian bond market in Feb

KUALA LUMPUR: The Malaysian bond market broke a three-month streak of outflows in February with renewed foreign interest that was largely attributable to the US Federal Reserve’s (Fed) more dovish stance, RAM Rating Services Bhd said.

Foreign holdings surged RM4.5 billion for the month following the Fed’s monetary policy statement released on Jan 30, the rating agency said in a statement yesterday.

The Fed left interest rates unchanged during the Federal Open Market Committee meeting in January. In its monetary policy statement, it stated it would be “patient” on further interest rate hikes in contrast to its earlier message of “further gradual increases”.

“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 head of research, Kristina Fong.

However, she added, there might still be a flight to safety, especially as the US-China trade spat and Brexit dynamics had yet to be resolved.

RAM said given the more robust demand amid renewed foreign interest and resilient domestic support, the yields to maturity of government and corporate bonds declined month-on-month across the rating spectrum.

It said the yield of the benchmark 10-year Malaysian government securities (MGS) dived in the first half of February, falling below the psychological level of 4.0 per cent on Feb 13, the first time since April 11, 2018. –Bernama