Global bonds mostly sold off in September as higher-than-expected inflation data fuelled expectations of more aggressive interest rate hikes by major central banks.

Local government bond market growth slowed in September. While the first Sustainability GII did draw decent demand at auction, heavy selling in the secondary market amid the global bond rout pushed yields higher. BNM is expected to remain on a rate tightening path.

In September, corporate bond issuances were dragged down by the unrated quasi-government segment despite increases in issuances of unrated corporate bonds and of the rated segment overall. Also not spared from the global bond rout, corporate bonds saw yields ending higher though the magnitude of the rise was smaller than that of government bonds.

Net foreign flows into the local bond market turned negative in September. The outflow was mainly driven by higher MGS redemptions, which outpaced foreign buying of Islamic government securities (GII and MITB).