Global Markets     

In the US, the unemployment rate hit an all-time high of 14.7% in April and moderated to 13.3% in May. The contraction in the manufacturing PMI remains severe for the second consecutive month in May amid weak demand and poor economic sentiment. In Europe, the German Constitutional Court struck a blow to ECB by declaring the massive PEPP as ultra vires and cited negative economic consequences of the programme. In the UK, BOE maintained the key interest rate at 0.1% and upped the APP by GBP200 billion to mitigate the pandemic-induced economic damage. In China, the composite PMI accelerated for the first time in three months due to the relaxation of COVID-19 measures. 

Malaysian Government Bond Market     

Outstanding MGS/GII in May declined to RM789.5 billion (Apr: RM791.0 billion) as gross issuance weakened to RM9.5 billion (Apr: RM14.0 billion) while the volume of matured papers surged to RM11.0 billion (Apr: RM10.5 billion). Demand for MGS/GII at public auctions in May was weaker as well with the one-year average BTC ratio coming in at 2.5x (Apr: 2.6x). In the secondary market, MGS yields were anchored down by the prospect of a more pronounced deceleration in economic growth and benign inflation in 2Q2020 for Malaysia. Investors expect the economy to moderate even further in 2Q2020 to reflect the heavier impact from the MCO, heightening the pressure for BNM to introduce more easing policies. 

Malaysian Corporate Bond Market     

Total outstanding long-term corporate bonds rose to RM708.5 billion in May (Apr: RM705.4 billion) as supply grew and the amount of redeemed papers fell. Gross issuance of long-term corporate bonds strengthened to RM7.1 billion (Apr: RM3.1 billion), supported by heavier issuance from quasi-government as well as both unrated and rated corporate bond issuers. YTD, the total gross issuance of long-term corporate bonds came in at RM32.2 billion (2019YTD: RM69.8 billion) with rated corporate bonds being the largest contributor followed by quasi-government bonds. In the secondary market, investment-grade corporate bonds continued to be well supported in tandem with government bonds. 

MARC Rating Activities     

In May, MARC assigned two preliminary ratings of AA-IS /Stable to Leader Energy Sdn Bhd’s proposed RM260.0 million ASEAN Green SRI Sukuk Wakalah and to Pelabuhan Tanjung Pelepas Sdn Bhd’s proposed RM1.9 billion IMTN. MARC also assigned a final rating of A+IS /Stable to Tropicana Corporation Bhd’s proposed RM1.5 billion IMTN Programme. In the same month, MARC reaffirmed 11 issue ratings under four different issuers and revised the outlook on one issue rating from stable to positive. MARC also affirmed the FI ratings of China Construction Bank (Malaysia) Bhd. Additionally, MARC has placed MEX II Sdn Bhd’s ratings on MARCWatch Negative.

Foreign Holdings of Local Bonds     

The local bond market posted net foreign inflows of RM1.5 billion in May (Apr: -RM2.0 billion) after registering negative foreign flows for the past three months. Total foreign holdings stood at RM187.3 billion (Apr: RM185.8 billion) as at end-May. Foreign demand was largely supported by easing policies introduced by BNM during the month. MGS accounted for most of the inflows (+RM1.9 billion) with foreign holdings of MGS amounting to RM150.5 billion (Apr: RM148.6 billion). YTD, the total net foreign outflows has amounted to RM17.4 billion (Jan-May 2019: -RM8.9 billion).