Report ID 60538900424 Popularity 672 views 8 downloads 
Report Date Dec 2021 Product  
Research Type Fixed Income BM Update Sector Bond Market Update - Bond Market Update
Price (RM)
Normal: RM300.00        
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Global Markets     In October, the Fed signalled that it may begin to taper its bond purchases in November. Investors raised their expectations that the Fed would normalise its policies quicker than expected to contain rising inflation. By end-October, UST yields along the 2y10y curve surged by 3bps to 20bps, reflecting the hawkish outlook. In the EU, surging energy prices, the recovery in demand and tight supply have led to increase in prices. Despite this, the ECB signals that there will be no imminent changes in the interest rates in 2022. The yields for 10y core and peripheral bonds rose significantly with Greece posting the highest increase. In the UK, the BoE kept the bank rate unchanged at a record low of 0.1% in November. The BoE predicted that the inflation rate would rise to around 5% in 2Q2022, driven by soaring energy prices and bottlenecks in supply. At end-October, the UK gilt yield curve flattened with yields at the short end till the belly rising sharply to as high as 33bps. Meanwhile, inflationary pressures also stacked up in China with both the CPI and PPI surging to 1.5% and 13.5%. Yields along the 2y10y curve edged higher by 9bps to 17bps while yields at the longer end rose by only 3bps to 6pbs, flattening the curve. Most of the sell-off pressure came from domestic investors as foreign flows continued to rise, albeit at a slower pace.

Malaysian Government Bond Market     Gross issuance of MGS/GII grew significantly in October to RM17.0 billion (Sep: RM14.0 billion), the highest monthly issuance YTD and in recorded history. For the first 10 months of 2021, total MGS/GII issued totalled to RM140.0 billion, RM30.0 billion shy of our lower projected range of RM170.0 billion to RM180.0 billion for 2021. Demand for MGS/GII papers issued in October was generally robust. The 7y MGS paper only managed to score a BTC ratio of 1.6x. Meanwhile, the other three papers featured, namely the 30y GII, the 5y MGS and the 10y GII, garnered healthy BTC ratios of 2.5x, 2.0x and 2.0x. However, MGS’ overall yield performance was weaker in October despite heightened foreign flows. Local investors were net sellers of MGS as they raised their bets on global monetary policy normalisation and the US Fed tapering their asset purchases. Hawkish expectations were driven by heightened inflationary pressures amid the rise in crude oil prices and reopening of the economy. By end-October, the MGS yield curve was seen flattened as most of the selling pressure was concentrated on the short end till the belly of the curve.

Malaysian Corporate Bond Market     In October, gross issuance of long-term corporate bonds declined to RM8.1 billion (Sep: RM10.8 billion) as new supply of unrated corporate, quasi-government and Cagamas bonds dwindled. Gross issuance of quasi-government bonds declined the most by RM2.8 billion m-o-m to RM1.9 billion (Sep: RM4.7 billion). Corporate bond yields were higher in October. Corporate bond yields surged as investors expect interest rates to rise next year as global central banks race to normalise their monetary policies. Unlike the MGS market, yield curves have steepened across the AAA, AA and A-rated spectrum. The 3y yields were seen higher by 14bps to 19bps while yields at the longer end surged by 19bps to 37bps. 

MARC Rating Activities     MARC assigned a final rating of AAAIS/Stable to Bank Pertanian Malaysia Berhad’s RM1.0 billion IMTN programme in October. In the same month, MARC also assigned a preliminary rating of A+IS/Stable to Yinson Holdings Berhad’s proposed RM1.0 billion IMTN programme. MARC also affirmed a total of 29 issue ratings from 21 different issuers with their outlook remaining largely unchanged at stable. Meanwhile, MARC downgraded its rating on Segi Astana Sdn Bhd’s RM415.0 million ASEAN Green MTN facility to A+/Negative from AA-/Negative.

Foreign Holdings of Local Bonds    In October, net foreign inflows in local bonds widened to RM2.9 billion (Sep: RM0.6 billion) with foreign investors remaining as net buyers for the third consecutive month. As at end-October, foreign holdings of local bonds amounted to RM254.0 billion (Sep: RM251.1 billion), equivalent to 14.7% of total outstanding (Sep: 14.6%). Foreign inflows were mostly concentrated on MGS and GII. Foreign demand for MGS/GII was supported by yield hunting activities and the stronger ringgit amid the surge in crude oil prices and the tabling of Budget 2022.