Malaysia Bond and Sukuk: Quarterly Report 2Q2019

GLOBAL MARKET Overview UST yields went down between 41 bps – 50 bps QoQ beginning the second half of 2Q19 as the trade war escalated. The Fed still maintain its benchmark rate between 2.25 – 2.50% as of 19 June 2019, but it is expected to cut rate in 3Q19. MY Government Bond Overview MGS and GII yields continue to decline across the curve as more central banks took a dovish stance. On 7 May 2019, the Overnight Policy Rate (OPR) was cut from 3.25% to 3.00%. The benchmark yield curve shifted lower from m-o-m led by the sharpest decline in the long end of MGS and GII. MY Corporate Bond & Sukuk Overview Corporate bond and sukuk yields in the AAA spectrum also experience a decline QoQ between 27 – 29 bp. The issuance of Corporate Bond and Sukuk for 2Q19 spiked to RM52.04 billion from RM29.04 billion in 1Q19 amid low interest rate environment.

  

MGS/GII auction registered an average 2.737x BTC for 2Q19 which is on par with the last quarter, 1Q19. The highest BTC came from 20Y GII 9/39 at 4.275x – the highest level in recent years for any govvies, while the lowest BTC recorded by 7Y MGS 7/26 at 1.510x. Overall, the amount of government bonds issuance YTD 2019 is RM52.5 billion. The demands for government bonds for 2Q19 were supported by the high probability of Federal Reserve to cut interest rates.

There will be four MGS auctions and four GII auctions for 3Q19 of which a majority of the auctions are reopening bonds except for 15Y MGS 07/34. 1 MGS and 7 GII will be maturing in 3Q19.

FOREIGN HOLDINGS OF MGS AND GII

Overview 
 

Foreign holdings of MGS and GII fell by RM1.5 billion and RM4.0 billion respectively QoQ. The amount of foreign holdings of MGS by the end of June was RM149.1 billion compared to in March which the amount was at RM150.7 billion. The amount of foreign holdings of GII by the end of June was at RM14.7 billion compared to in March, which the amount was at RM18.7 billion. Throughout the 2Q19, May recorded the highest outflow by RM4.0 billion down from RM162.0 billion in April. Factors that partly affect the decline in foreign holdings are the probability of Malaysian government bond to be excluded from the Norwegian Sovereign Fund and FTSE Rusell WGBI, which is yet to be announced.

CORPORATE BOND & SUKUK

Overview
 

This report has been prepared and issued by Bond and Sukuk Information Platform Sdn Bhd (“the Company”). The information provided in this report is of a general nature and has been prepared for information purposes only. It is not intended to constitute research or as advice for any investor. The information in this report is not and should not be construed or considered as an offer, recommendation or solicitation for investments. Investors are advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situation and particular needs and should seek appropriate personalised financial advice from a qualified professional to suit individual circumstances and risk profile.
 
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.