KUALA LUMPUR: The Malaysian bond market saw a net foreign outflow of RM2.4bil in August as financial market turmoil continued amid a slump in the Turkish lira and an escalation in the US-China trade spat.
Malaysian Rating Corp Bhd (MARC) said the sell off in Malaysian bonds was also due to the increase in matured Government Investment Issue (GII) papers in August, which came in at RM8.5bil.
In the eight months to August 31, total net foreign outflow came to RM19bil, slightly lower when compared with the net outflow of RM21bil recorded in the first half of 2018.
In August, foreign holdings of Malaysian Government Securities (MGS) and total Malaysian bonds stood at 40% and 13% of total outstanding, down from the previous month’s 41% and 14%.
“Last year, the Malaysian bond market recorded a net foreign outflow of RM8.9 billion after posting a net inflow of RM0.8 billion in 2016.”
However, MARC said the secondary market performance of local govvies was supported at the end of August on the back of anticipation of a softer Malaysian economy going forward.
“In the later part of the month, buying interest was concentrated on MGS at the short-end of the curve.
“The yields of short-term MGS fell faster than those of longer tenures amid expectations that Bank Negara Malaysia (BNM) will keep its key Overnight Policy Rate (OPR) unchanged at 3.25% for the rest of 2018. As of end-August, the 10y/3y MGS spread was wider at 56 bps compared with 50 bps in July,” said MARC.