BIX ARTICLE
Malaysia Bond and Sukuk: Quarterly Report 2Q2023
Jul 28, 2023
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7 min read
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2Q2023 – Domestic bond market shows volatility as investors seek higher yields in emerging market bonds
In the second quarter of this year, the yield curve for Malaysian bonds experienced a flattening trend, reflecting the country's favorable position within emerging markets. This was driven by the United States' indication of an imminent pause in its forceful monetary policy tightening. Throughout Q2 2023, there was a consistent foreign demand for domestic bonds as investors sought attractive yields in emerging market bonds, further bolstered by market prices following the conclusion of Federal Reserve hikes.
| GLOBAL MARKET Overview 3-year yield for the US Treasury rose by 68 bps q-o-q. The yield on the benchmark 10-year Treasury notes has also risen by 33 bps q-o-q. The US bond market revealed a complex landscape, as there was a growing anticipation that the Federal Reserve would continue raising interest rates and maintaining them at elevated levels for an extended period. MY Government Bond Overview The MGS yield was mixed in q-o-q, where the 3-year was up by 12 bps and the 10-year declined by 6 bps. GII performance was also mixed, the q-o-q increase across by 18 bps for 3-year and decrease by 8 bps for 10-year. The predominant driving force behind the recent market dynamics has been the volatility observed in the rates market. The notable observation is that investors swiftly transitioned from a hawkish stance to a dovish one regarding their expectations for US monetary policy. MY Corporate Bond & Sukuk Overview The corporate bond yields decrease (q-o-q) throughout the second quarter of 2023. The yields down 5 bps for 3-year and 12 bps for 10-year. |
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GOVERNMENT BOND AUCTION
Overview
| The government bond auction for 2Q23 garnered an average BTC of 2.059x, a slightly decrease from the previous quarter (1Q23: 2.234x). A new issued of MGS 04/28 received the highest BTC at 2.434x. The new/reopening issuances for MGS/GII stood at RM36.0 billion (1Q23: RM40.5 billion). As of June 2023, the outstanding amount of MGS/GII was at RM1,063.66 billion (1Q23: RM1,040.56 billion). The strong secondary market flows seen among both local institutions that included pension funds, inter-bank participants, local GLIC’s, Lifers and asset management companies, plus offshore parties. In total, there were one (1) new issuance and eight (8) reopening of MGS and GII auctions in 2Q23. |
| For the upcoming 3Q23, there will be five (5) reopening of MGS. For GII there will be five (5) reopening, totalling to ten (10) reopening. |
UPCOMING ISSUANCE 3Q23
Source BNM, BPAM, BIX Malaysia
FOREIGN HOLDINGS OF MGS AND GII
Overview
| The foreign net flow to MGS and GII in 2Q23 amounted to –RM0.32 billion, RM3.01 billion and RM5.21 billion respectively in April, May and June as foreign investors turn net buyer. As of June 2023, the total foreign holdings of MGS and GII stood at RM248.68 billion (March 2023: RM240.48 billion), 3.41% increase from the previous quarter. |
CORPORATE BOND & SUKUK
Overview
| RM69.72 billion corporate bonds and sukuk were issued in 2Q23 (1Q23: RM65.17 billion), 6.98% increase from the previous quarter. The not rated bonds and sukuk were the most issued with RM36.39 billion issuances, followed by AA2/AA bonds at RM9.07 billion issuances. For 2Q23, the largest corporate issuances were issued by RHB BANK BERHAD, RHBBANK IMTN 25.05.2026 of RM1.50 billion. |
ISSUANCE 2Q23
RATING OUTLOOK
| There was zero (0) default and two (2) upgrades recorded in 2Q23. However, there is one (1) downgraded bonds/sukuk in this quarter. ⬆️ Upgrade
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Source: MARC, RAM and BIX Malaysia
BOND STATISTICS
Overview
Outstanding Amount by Bond Classes
| As of June 2023, the outstanding amount of the Malaysian bond market stood at RM1.96 trillion, increased by 2.08% compared to the end of 1Q23 (March 2023: RM1.92 trillion). The largest outstanding bonds were from government issuances which consist of 57.56% of total issuances at RM1,126.66 billion, followed by corporate issuances of 24.70% at RM483.50 billion, and Quasi-government of 17.74% at RM347.27 billion. |
Overview
Outstanding Amount by Principal and Bond Classes
| As of June 2023, the outstanding amount of the Government conventional bond and the Government Islamic Bond (Sukuk) stood at RM564.86 billion and RM561.80 billion, respectively. The conventional Quasi-govt outstanding amount stood at RM22.45 billion compared to its Islamic counterpart that stood at RM324.82 billion. For corporate issuances, the conventional bond outstanding amounted RM116.06 billion while the corporate Sukuk was recorded higher at RM367.44 billion. |
Disclaimer
The information contained in this report is prepared from data believed to be correct and reliable at the time of issuance of this report. While every effort is made to ensure the information is up-to-date and correct, the Company does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information contained in this report and accordingly, neither the Company nor any of its affiliates nor its related persons shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.
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