Malaysian Bond Market
The local market witnessed some selling pressure at the start of the week with thin liquidity, but managed to pare losses mid-week following the global risk-off sentiment as well as the release of first quarter 2020 Malaysia GDP print.
Despite, the first quarter GDP coming in better than expected at +0.7% y-o-y (fourth quarter 2019: 3.6%; consensus: -1.0%), Bank Negara warned that the second quarter will see a contraction in view of current conditions before improving in the second half while headline inflation is likely to turn negative this year.
The cautious tone from Bank Negara drove some demand for short-term papers with the Malaysian Government Securities (MGS) curve steepening with the front to the belly part of the curve (3Y to 10Y) falling 2–6bps while the longer tenures (15Y to 30Y) rose 4.5–8bps.
Additionally, the reissuance auction of the 15Y Government Investment Issue (GII) ‘11/34 closed with a strong bid-to-cover of 2.171 times and a high/ low/average at 3.269%, 3.210% and 3.235%, respectively.
The total size amounting to Rm5bil includes Rm1.5bil of private placement. As at noon yesterday, the 3-, 5-, 7-, 10-, 15-, 20- and 30-year benchmark MGS yields settled at 2.30%, 2.53%, 2.75%, 2.87%, 3.18%, 3.44% and 3.84%, respectively.
Activities in the secondary local govvies segment shrank 45% w-o-w to Rm14.0bil from last week’s Rm25.3bil. The MGS segment fell 26% w-o-w to Rm8.9bil from Rm12.0bil in the previous week while the GII tumbled 62% to Rm3.7bil from Rm9.6bil.
In the GG/AAA segment, Khazanah Nasional Bhd 2022–2024 tranches dominated the list with a total of Rm1.26bil, trading between 2.44% and 2.67%. These were followed by Danainfra Nasional Bhd 2023–2034 Islamic medium-term notes (IMTNS), which accumulated Rm470mil at 2.50%–3.38%.
Meanwhile in the AA segment, BGSM Management Sdn Bhd 2021– 2027 IMTNS gathered Rm160mil, trading at 3.03%–3.79%. Next were YTL Power International Bhd ‘03/23 and ‘10/24 MTNS amounting to Rm80mil, changing hands at 3.23% and 3.36%, respectively.