BIX ARTICLE
Malaysia Bond and Sukuk: Quarterly Report 3Q2021
Jan 24, 2022
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3Q2021 – CHALLENGES IN MALAYSIAN BOND AND SUKUK MARKET
The expansionary concept of the upcoming Budget 2022 and Bank Negara Malaysia (BNM) kept its Overnight Policy Rate (OPR) unchanged at 1.75%, may have impacted the prices of bond in the market.
The government expects Malaysia’s fiscal deficit to narrow to 6% of GDP in 2022 from 6.5% of GDP this year.
| GLOBAL MARKET Overview The short yield curve, 3-year US Treasuries yield increased 7 bps q-o-q. The belly curve up to 10-year yields also increased to 7 bps. In Fed ‘s quarterly projections, 13 of 18 officials favored at least one rate increase by the end of 2023. MY Government Bond Overview MGS and GII performance are mixed q-o-q with short 3-year yields increased 15-26 bps. Malaysian bond market has priced in a gradual normalization of the OPR to about 3% or 3.25% in the next two years. MY Corporate Bond & Sukuk Overview Corporate AAA yields increased across the curve. It is seen to be an effective funding instrument to manage sustainability |
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GOVERNMENT BOND AUCTION
Overview
| The government bond auction for 3Q21 garnered an average BTC of 2.289x, an increase from the previous quarter (2Q21: 2.191x). A reopening of 10Y GII 10/30 received the highest BTC at 3.403x. The new/reopening issuances for MGS/GII stood at RM 42.5 billion (2Q21: RM 40 billion). As of September 2021, the outstanding amount for MGS/GII was at RM 876.32 billion (2Q21: RM 866.02 billion). There are some prospects for an increase to the statutory debt limit to 65% of GDP, which would drive expectations for wider fiscal deficits and high bond supply for this year and next |
3Q21 AUCTION
Source BNM, BIX Malaysia
| There will be nine reopening MGS and GII auctions in 4Q21. |
UPCOMING ISSUANCE 4Q21
Source BNM, BPAM, BIX Malaysia
FOREIGN HOLDINGS OF MGS AND GII
Overview
| The foreign inflow to MGS and GII tapered off in 3Q21 with net inflow amounted -RM3.15 billion, RM 6.31 billion and - RM 0.22 billion respectively in July, August and September. As of September 2021, the total foreign holdings of MGS and GII stood at RM 225.87 billion (June 2021: RM 222.92 billion), a 1.32% increase from the previous quarter. In the recent report, near-term bond supply demand outlook argue for higher bond yields as foreign bond inflows have been losing momentum at time when issuances are expected to be ramped up going into a year-end. |
CORPORATE BOND & SUKUK
Overview
| RM 49.25 billion corporate bonds and sukuk were issued in 3Q21 (2Q21: RM 29.95 billion), 264.4% increase from the previous quarter. AA+ rated corporate bonds and sukuk were the most issued with RM 11.40 billion issuances. The government-guaranteed is the second most issued with RM 9.05 billion issuances. Corporate credit space in Malaysia is dominated with AAA rated issuances with year-to-date issuance amounted to RM 27.70 billion. In 3Q21, Malayan Banking Berhad issued the largest amount of RM 3.0 billion DANAINFRA ICP 365D 08.04.2022 - Tranche No 5. |
ISSUANCE 3Q2021
Source BNM, BIX Malaysia
RATING OUTLOOK
Source: MARC, RAM and BIX Malaysia
BOND STATISTICS
Overview
Outstanding Amount by Bond Classes
| As of September 2021, the outstanding amount of Malaysian bond market was at RM 1.72 trillion. (June 2021: RM 1.64 trillion). Breakdown by bond classes, the outstanding amount for government issuances stood at RM 641.03 billion. The corporates and quasi-government outstanding amounts were at RM 318.60 billion and RM 763.76 billion, respectively. |
Overview
Outstanding Amount by Principal and Bond Classes
| As of September 2021, the outstanding amount of the Government conventional bond was at RM 599.18 billion and the Government Islamic bond (Sukuk) at RM 41.85 billion. The conventional Quasi-Govt outstanding amount stood at RM 20.25 billion whereas its Islamic counterpart stood at RM 298.35 billion. For corporates issuance, the conventional bond outstanding amount was at RM 141.20 billion and its Islamic sukuk was at RM 622.56 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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