US Treasuries (UST) Market Malaysian Bond Market

willingness to negotiate “any time, any format”.

Meanwhile, the economic release was rather mixed, with April’s export climbing to 7.8% y-o-y from 2.1% y-o-y in March while May Nikkei Flash PMI eased to 52.5 from 53.3 in April.

The performance of the Asia ex-Japan currencies was mixed against the greenback this week. The Thai baht was the best performer for the week, gaining 0.6% over the week after the release of first quarter (Q1) GDP, which recorded above market expectation at 2% q-o-q from 0.5% q-o-q with a consensus of 1.1%.

Meanwhile, the Singapore dollar held firm, up by 0.3% after the country’s economy improved as the Q1 GDP grew at a faster 4.4% y-o-y compared to the period prior at 3.6% y-o-y.

The ringgit slid by 0.2% to 3.980 against the stronger US dollar. The FBM KLCI slipped 4.3% to 1,775.6 and recorded a net foreign outflow of RM195mil. Over the week, economic release includes April inflation print, which rose below expectaction of 1.4% from 1.3% in March with a consensus of 1.6%.

The US Treasury yield fell across the curve for the second consecutive week largely due to the dovish tilt of the FOMC minutes.

Adding on to the rally was the Fed’s willingness to tolerate inflation overshoot and the re-emergence of the US-North Korea geopolitical tensions following provocative statements which led to Trump’s U-turn.

At yesterday’s noon pricing, the 2-, 5- and 10-year benchmark UST yields stood at 2.52%, 2.83% and 2.99%, respectively.

The yields in the local govvies rose across the curve due to domination of the domestic headlines following concerns over huge local public debt, which was later revealed at RM1.09 trillion as of December 2017.

Meanwhile, the focus was also on the 10Y Malaysian Government Securities (MGS) auction, which saw ‘06/28 replacing ‘11/27 as the new 10Y benchmark. The auction ended with a decent BTC of 1.851 times and averaged 4.202%.

At yesterday’s noon pricing, the 3-, 5-, 7-, 10-, 15-, 20- and 30-year benchmark MGS yields settled at 3.75%, 3.89%, 4.03%, 4.25%, 4.64%, 4.90% and 4.95% respectively.

Trading activities for the benchmark local govvies’ was subdued compared to last week. For the week, trading volume stood at RM10.9bil from RM18.4bil in the week before.

Meanwhile, trading activities in the secondary corporate bond market decreased week to date, with total trading volume slowing down to RM1bil versus last week’s RM900mil. Some 41% of the trading volume was from GG/AAA, with 58% from the AA segment and the remaining 1% from the A segment.

In the GG/AAA segment, notable trades included 2018-2020 Cagamas Bhd tranches, which closed with mixed yields between 3.68% and 4.27% with a total trading volume of RM70mil. Besides it, ‘06/18 and ‘06/21 Pengurusan Air SPV Bhd bond yields were unchanged at 3.47% and 24 basis points (bps) higher at 4.20%, respectively, with RM50mil changing hands.

Furthermore, interest was seen in the ‘08/20 Malaysia Airports Holdings Bhd bond, which closed with yields 13 bps higher at 4.38%, with RM40mil traded. Meanwhile, 2022-2033 Projek Lebuhraya Usahasama Bhd tranches ended with yields mixed between 4.38% and 5.06%, with a trading volume totalling RM40mil.

Elsewhere in the AA segment, notable trades were seen in the 2019-2024 BGSM Management Sdn Bhd tranches, which recorded a trading volume of RM101mil, with yields closing higher between 4.46% and 4.82%.

From the energy sector, ‘12/18 and ‘12/19 Malakoff Power Bhd bonds posted a trading volume of RM100mil and closed with yields 16 bps higher at 4.37% and 4.53% respectively.

Furthermore, there was some interest in the ‘06/20 and ‘04/28 UMW Holdings Bhd bonds closing with yields mixed between 4.53% and 6.35%, and a trading volume of RM41mil. In addition, ‘11/22 Gamuda Bhd bond registered higher yields by 18 bps to 4.82% with RM40mil changing hands.