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Global
Markets
IHS Markit’s flash reading for
the US Composite Output Index registered the steepest contraction in more than
six years amid COVID-19 outbreak. In Europe, the ECB said that policy easing
measures and a fiscal push are needed for inflation to return. In the UK, pay
growth moderated in the private services sector but remained steady in the
public services sector and the manufacturing sector. In China, total social
financing surged to an all-time high as the government sought to support the
economy suffering from COVID-19. The outbreak took its toll on the Chinese
economy with the PMI for both manufacturing and non-manufacturing sectors
plunging amid factory closures and labour shortages.
Malaysian Government Bond
Market
In February, the total combined
outstanding MGS/GII rose to RM781.7 billion (January: RM769.7 billion). The
increase was attributed to the significant increase in gross issuance activity
with GII dominating and contributing RM8.0 billion (January: RM3.5 billion)
towards total issuance. In the secondary market, MGS yields across the curve
continued to tighten amid a weak domestic economic outlook that gave support
for the current low yield levels and raised expectations of further cuts in the
OPR. The worsening COVID-19 outbreak and the government’s announcement of a
stimulus package for 2020 further strengthened the risk-off sentiment.
Malaysian Corporate Bond
Market
Gross issuance of long-term
corporate bonds picked up higher by RM6.6 billion m-o-m to RM10.7 billion
(January: 4.1 billion) as corporate bond issuers took their cue from the
current low yield environment to raise more funds. Large volume prints mostly
came from the quasi-government segment, which was led by Prasarana Malaysia
Bhd’s RM3.5 billion sukuk issued in five tranches. In the secondary market, corporate
bond benchmark yields drifted lower on continued strong interest in especially
quasi-government as well as AAA and AA-rated bonds. Benchmark yields for AAA,
AA and A-rated fell by 12bps to 37bps (January: 13bps to 32bps).
MARC Rating Activities
In February, MARC assigned a
final rating of AA-IS /Stable to TG Excellence Bhd’s proposed RM3.0 billion
Perpetual Sukuk Wakalah Programme, as well as a preliminary rating of
AAA/Stable on Bank Pembangunan Malaysia’s proposed RM5.0 billion IMTN
programme. MARC also affirmed a total of three issue ratings with stable
outlook under three different issuers, as well as Bank Pembangunan Malaysia’s
AAA/Stable FI rating. By end-February, PLUS’ AAAIS /Stable rating on its
RM23.35 billion Sukuk Musharakah Programme remained on MARCWatch Developing.
Foreign Holdings of Local
Bonds
Foreign investors turned net
sellers of local bonds in February. However, the local bond market remained
resilient, suggesting support from onshore investors. Foreign holdings of local
bonds moderated by RM8.1 billion to RM200.1 billion (January: RM208.2 billion),
equivalent to 13.1% (January: 13.8%) of total outstanding local bonds. The
decline in holdings was mainly attributed to the reduction in foreign holdings
of MGS. Foreign demand was sapped by rising interest in safe-haven assets in
developed markets especially USTs as the death toll from COVID-19’s global
spread rose significantly.
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