Global Markets          

The Fed increased the FFR by 25bps in March 2022, the first rate hike since December 2018 to address spiraling inflation. Meanwhile, the market is pencilling in another six rate hikes in 2022 and three more hikes in 2023. The ECB maintained the deposit facility rate at -0.5%, although other major central banks moved ahead with the rates hike. The EU faced an elevated inflation rate of 6.2% y-o-y in February (Jan: 5.6%), tripling the ECB's 2% inflation target amid high energy costs. In March, BoE hiked its key lending rate by 25bps for the third consecutive time, taking the base borrowing rate to 0.75%. The market expects another 25bps hike to 1% in May to continue tackling inflation. CGB yields continue to rise in March. The spike in COVID-19 cases led to another round of lockdowns in Shanghai, resulting in the market expecting slower economic growth for China. 

Malaysian Government Bond Market          

In March 2022, the total MGS/GII outstanding shrank to RM926.3 billion from RM930 billion recorded in the preceding month. The drop was due to a surge in the volume of matured papers to RM17.5 billion (MGS: RM10.7 billion; GII: RM6.8 billion) after three consecutive months of zero redemption. Gross issuance came in slightly lower at RM13.5 billion (February: RM14.5 billion), dragged down by the GII segment which came down to RM5.0 billion (February: RM9.5 billion). This scenario is notwithstanding the higher issuance of MGS amounting to RM8.5 billion (February: RM5.0 billion). Not immune to the global bond rout, local govvies came under heavy selling pressure, with yields closing the month at the highest level in more than two years. Inflation accelerated in major economies, sparking concerns of more aggressive interest rate hikes, which intensified jitters among investors of local bonds.

Malaysian Corporate Bond Market         

Total corporate bond issuance rose sharply to RM12.6 billion in March 2022 compared to RM3.2 billion recorded in February 2022 amid broad-based increases in issuances of all segments. Rated corporate bonds – Cagamas included – led the issuance with RM7.0 billion (February: RM2.6 billion). Meanwhile, in the unrated segment, issuances of unrated corporate bonds and quasi-government increased to RM1.4 billion (February: RM0.6 billion) and RM4.2 billion (February: no issuances), respectively. Local corporate bond yields were also on an uptrend, albeit at a smaller magnitude. This saw the 5y blended credit spreads narrowing to 85bps, lower than the 5y average of 127bps. The jump in yields was more pronounced in corporate bonds rated AA and above than in the A-rated spectrum.

 

MARC Rating Activities         

MARC Ratings assigned final ratings of three issues into MARC Ratings' universe in March. MARC Ratings has assigned ratings of: 1) A+IS to Tan Chong Motor Holdings Berhad's (TCMH) RM1.5 billion Islamic Medium-Term Notes (Sukuk Murabahah) Programme; 2) A+IS to MBSB Bank Berhad's RM5.0 billion Islamic Medium-Term Notes (Sustainability Sukuk Wakalah) Programme; and 3) AA-IS to MMC Port Holdings Sdn Bhd's (MMC Port) RM1.0 billion Sukuk Murabahah Programme. In addition, MARC Ratings affirmed seven issue ratings from three different issuers, with their outlook maintained at stable. MARC Ratings has also withdrawn its rating of A+IS on TSH Sukuk Ijarah Sdn Bhd's RM300 million Medium-Term Notes (IMTN) Programme, following the full redemption of the outstanding RM15 million and subsequent program cancellation.  

Foreign Holdings of Local Bonds         

The local bond market experienced massive net foreign outflows of RM4.0 billion in March (Feb: +RM3.1 billion) after recording net foreign inflows in the first two months of 2022 amid a hawkish chorus by the Fed in quelling red-hot inflation. The foreign holdings' composition of local govvies fell to 25.1% in March (Feb: 25.5%). Meanwhile, corporate bonds also logged outflows of RM346.6 million (Feb: +RM114.1 million). Overall, in March, foreign holdings’ share in the local bond market plummeted to 14.7% (Feb: 14.9%).