MALAYSIAN BONDS STILL ATTRACTIVE
Foreign holdings surge to 13-month high last month despite rise in Treasury yields
FOREIGN appetite for Malaysian bonds surged to a 13-month high last month despite the recent rise in the United States Treasury yield.
Foreign holdings in ringgitdenominated debt securities rebounded 4.2 per cent month-onmonth last month, rising RM7.8 billion to RM192.3 billion, said Kenanga Research.
This reversed the 1.6 per cent contraction month-on-month in September, it said yesterday.
Consequently, the total foreign holdings of Malaysia’s debt jumped to 14 per cent from 13.4 per cent in the preceding month.
“Despite the recent rise in the US Treasury yield fuelled by the expectations of a more aggressive US Fed (Federal Reserve) rate hike as labour market tightens, Malaysian securities are still attractive to foreigners,” said Kenanga Research.
It said the US economy added 250,000 jobs last month and the unemployment rate remained at a 49-year low of 3.7 per cent, demonstrating a solid economic growth that continued to push demand for US Treasury notes.
As a result, the 10-year Treasury note average yield rose 16 basis points (bps) to 3.17 per cent last month (September: +14 bps), while the benchmark 10-year MGS average yield inched up by four bps to 4.14 per cent (September: +7 bps).
Consequently, the MGS-US Treasury average yield spread narrowed to 98 bps from 109 bps in September, Kenanga Research added.
It said foreign holdings of Malaysia’s private sukuk increased sharply by 12.7 per cent to RM7.7 billion last month after falling for three consecutive months.
Similarly, Kenanga Research said MGS had rebounded by 3.2 per cent to RM153 billion (September: -3.6 per cent), while foreign holdings of Bank Negara Bills surged 25 per cent to RM5 billion (September: -20 per cent).
Year-to-date, net total foreign holdings dropped by RM14.4 billion, with RM11.1 billion debt maturity in the fourth quarter of this year compared with RM6.4 billion in the third quarter of this year.
Kenanga Research said the ringgit was expected to be under pressure by year-end, but higher oil price, which was trading above US$70 (RM292.45) per barrel, positive current account balance and ample liquidity might continue to support the currency.
It revised its ringgit end-ofyear forecast to RM4.15 against the US dollar from RM4.05 earlier due to uncertainty in the global economy and the prospect of a stronger greenback.
For the past week, the ringgit traded within the 4.16-4.18 range, said Kenanga Research.