Summary          

Global Bond Markets         

Global government bonds saw risk-off rallies in March amid the banking sector turmoil in the US and Europe. As a result, bond yields mostly declined across the curve. Going forward, major central banks are likely to continue focusing on striking a balance between containing elevated inflation on the one hand and rising financial risks from monetary tightening on the other. The outcome will likely be a shift towards a more cautious approach in interest rate decisions.          

Malaysian Government Bond Market          

Local govvies gained ground in March, with MGS yields mostly declining across all maturities. This was underpinned by investors’ optimism over Malaysia’s growth outlook given that the domestic financial market had emerged untouched by the banking turmoil in the US and Europe as well as BNM’s decision to hold the OPR at 2.75% in its March meeting. BNM had reiterated that it will continue to assess the cumulative impacts of previous rate hikes on the economy.         

Malaysian Corporate Bond Market           

In March, corporate bond issuance grew by nearly twofold to RM10.0 billion (Feb: RM5.5 billion). Increases in issuances were recorded in three of four segments, namely rated corporate bonds (Mar: RM6.9 billion; Feb: RM4.2 billion), Cagamas (Mar: RM1.7 billion; Feb: RM0.1 billion) and unrated corporate bonds (Mar: RM1.3 billion; Feb: RM0.7 billion).         

Foreign Holdings of Local Bonds         

Net foreign inflows rose to RM6.6 billion (Feb: +RM4.3 billion), the highest in two years, as the Fed appeared to be closer to the peak of its rate hike cycle. This was led by RM7.9 billion of net foreign flows into local govvies, notwithstanding the net foreign sell-off of RM1.2 billion in ringgit corporate bonds. Consequently, foreign holdings of local bonds rose to 13.5% of the total outstanding from February’s 13.1%.