Malaysia Recorded an Impressive Foreign Bond Last June, Totalling Up to RM198.9 Billion; the Highest Recorded Net Inflow in Six Years
Malaysia’s foreign holdings’ bonds climbed to a massive RM198.9 billion last month, according to Malaysian Rating Corp Bhd (MARC). The foreign bonds have grown by RM11.6 billion; making June 2020 the highest recorded net inflows in six years. The last highest recorded net foreign inflows were recorded back in May 2014, with a whopping RM13.5 billion.
67.2% of the foreign bond inflows were distributed into the Malaysian Government Securities (MGS). Consequently, the foreign MGS holdings increased up to RM156.9 billion from RM149.1 billion in May 2020 or 37.3% of the total outstanding.
Global Investors’ Confidence in Malaysia Bonds
According to the MARC, the inflows were predominantly concentrated on the front end to the swell of the yield curve, given the relatively substantial narrowing of the positive MGS/US Treasury yield differentials. Additionally, MARC also mentioned that the global accommodative monetary policy along with the nation’s subdued inflation angle had propelled the unanticipated international demand. MARC noted that MGS yields had initially increased during early June after the additional RM10.0 billion of economic stimulus measures.
Malaysia’s Yields Began Pulling Back
However, the yields started to a pullback in the coming weeks as bargain-hunting activities followed. MGS also gained from the domestic economic data releases in the last week of June, which eventually led to the 25 basis points (bps) cut in the Overnight Policy Rate (OPR) on 7 July 2020 to 1.75%. MARC noted that given the pullback, MGS yields had remained broadly higher as of end-June in relation to end-May by 5.0 bps to 19 bps. However, the MGS market had the capability to recover, as yields remained lower compared to their highest attained point in March this year. MARC also added that the 10-year MGS recorded a historical low of 2.63%.