Malaysian bond market

The Malaysian Government Securities (MGS) yields eased across the curve 2-7bps while the closely watched 10-year MGS fell 7bps to 2.80%.

The buying was largely supported by Bank Negara’s decision to reduce the OPR by 50bps to 2% as expected. With this cut, the cumulative interest rate reduction thus far in 2020 amounts to 100bps.

The meeting was filled with dovish hints with Bank Negara saying growth was severely affected in first half 2020 and the headline inflation is likely to hover around the negative region due to the lower global crude oil prices.

Besides, Bank Negara also tweaked its monetary policy slightly by allowing all banks can use government bonds for its statutory reserve requirement (SRR) compliance effective from May 16 till 21 May 2021, which previously was aimed only for principal dealer.

This measure will release an approximately Rm16bil into the financial system while the SRR is kept unchanged at 2%. As at yesterday noon, the 3-,5-, 7-, 10-, 15-, 20- and 30-year benchmark MGS yields settled at 2.28%, 2.46%, 2.65%, 2.79%, 3.04%, 3.33% and 3.64% respectively.

Transaction activities in the secondary local govvies segment rose 8% week-on-week (w-o-w) to Rm19.9bil from last week’s Rm18.4bil. The MGS segment fell 9% w-o-w to Rm9.7bil from Rm10.7bil in the previous week while the Government Investment Issue climbed 9% to Rm8.2bil from Rm7.5bil.

In the GG/AAA segment, Danainfra Nasional Bhd 2022–20449 Islamic medium-term notes (IMTNS) dominated the list with a total of Rm255mil, trading between 2.41% and 4.03%. These were followed by Turus Pesawat Sdn Bhd 2023–2032 tranches, which accumulated Rm180mil at 2.69%–3.34%.

Meanwhile in the AA segment, BGSM Management Sdn Bhd 2023– 2027 tranches gathered Rm145mil, trading at 3.41%–3.79%. Next were Public Bank Bhd ‘07/29 MTNS that gobbled up Rm110mil, changing hands between 3.42% and 3.50%.