Government bonds saw heavy selloff on both sides of the Atlantic as investors digested the latest statements of major central banks. In China, on the other hand, government bonds saw some buying interest due to an earlier-than-expected reopening of the Chinese economy and kicking in of government support for the debt-ridden property sector.

                           

Local govvies extended gains in December, spurred by China’s reopening, rising expectations of less aggressive interest rate hikes by major central banks moving forward and signs of abating domestic inflationary pressure. Notably, the sale of RM4.0 billion 3y GII reopening drew impressive demand with a BTC ratio of 4.21x, which was the highest since June 2019.

                        

In December, the local corporate bond market recorded total gross issuances of RM43.8 billion, a sharp rise from RM9.4 billion in November and the highest monthly level ever recorded. Notwithstanding increased issuances, local corporate bonds tracked gains in MGS with yields falling between 5 bps and 12 bps for all maturities across the AAA, AA, and A-rated spectrum.

Foreign net selling of ringgit bonds decelerated further to RM874.6 million in December, compared to RM1.0 billion in November and RM6.3 billion in October. The outflows, mainly driven by massive redemptions of MITB, were partially offset by foreign buying in MGS and GII.