Malaysian Bond Market Gains Support Amid Us Fed Rate Cut Expectations - Ram

KUALA LUMPUR, July 19 (Bernama) -- RAM Ratings Services Bhd projects the Malaysian bond market to likely gain support in July with a “stronger chance” of the United States (US) Federal Reserve (Fed) cutting interest rate.

It said foreign holdings of Malaysian bonds fell by RM576.8 million in June (May: net inflow of RM5.5 billion), led by a selloff of RM2.6 billion of Malaysia Government Securities (MGS).

"The decline in MGS holdings was likely a result of a lack of rollover options, given a large negative net issuance amid lumpy maturities last month (matured: RM21.5 billion; net issuance: RM16.5 billion).

"Foreign buying of Government Investment issue (GII) continued in June (RM1.4 billion), as did purchases of short-term Malaysian Treasury Bills (MTB) and Malaysian Islamic Treasury Bills (MITB) (RM1.2 billion)," it said in a statement today.

The firm said the bond market could “enjoy further attention” in July as a softer-than-expected US inflation print and dovish remarks by the US Fed chair Jerome Powell on July 15 convinced markets that the Fed would cut interest rates in September.

"The market-assigned probability of a rate cut in September surged to 97 per cent on July 18 from about 64 per cent as of end-June, according to CME FedWatch Tool data," the firm added.

RAM Ratings highlighted that yields of 10-year UST securities and MGS dropped by a respective 15.0 basis points (bps) and 3.2 bps month-on-month, reaching 4.36 per cent and 3.88 per cent by the end of June (end-May: 4.51 per cent and 3.91 per cent).

The ringgit appreciated to 4.67 against the US dollar on July 18 (end-June: 4.72) while 10-year UST and MGS yields eased further at 4.20 per cent and 3.83 per cent, respectively.

-- BERNAMA