CREDIT ANALYSIS REPORT

MONTHLY REVIEW: RATE CUT PUSHBACK LEADING TO BOND SELL-OFF - JANUARY 2024 - FULL REPORT

Report ID 60538900469689 Popularity 1139 views 59 downloads 
Report Date Jan 2024 Product  
Company / Issuer Fixed Income Bond Market Update Sector Bond Market Update - Bond Market Update
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Rationale
Summary          

  • Malaysia posted a weaker-than-expected advanced gross domestic product (GDP) estimate of 3.4% as at 4Q2023 (Consensus: 4.1%; 3Q2023: 3.3%) as the services sector moderated and the manufacturing sector remained flat, which will bring the advanced estimate full year GDP growth to 3.8%, based on the advanced estimate. A stronger rebound in tourism and recovery in external demand will support a stronger GDP growth in 2024.
  • The ringgit weakened against the greenback in January, driven by prospects of a higher-for-longer interest rate environment in the US. Going forward, the shift in advanced economies’ interest rate trajectory could exert pressures on the ringgit in the near term and lead to fund flow volatilities in the local bond and equity markets.
  • The Malaysian Government Securities (MGS) market reacted to the rise in US Treasury (UST) yields following investors’ reassessment of the Fed’s interest rate policy amid positive US economic data. The stable domestic inflation and expectations of Bank Negara Malaysia’s (BNM) unchanged policy rate may stabilise the local bond yields amid the elevated global interest rate environment.
  • The local corporate bond market rallied, with yields of the high-rated category dropping, particularly at the longer end of the curve. The month’s rally in the local corporate bond market suggests positive investor sentiment amid expectations of a firmer domestic economic environment. Consequently, the yield spread between these high-rated corporate bonds and MGS narrowed in January.
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