KUALA LUMPUR: Malaysian bonds delivered South-East Asia’s worst performance in August as concern over the supply of long-dated notes and the risk of an interest-rate hike makes investors cautious.
The yield on 10-year bonds jumped 16 basis points last month, the most in almost two years, and higher than the advance seen in Thailand and Singapore.
Yields on similar-maturity debt in the Philippines and Indonesia declined at least 10 basis points each.
“Selling has been more persistent than we had expected,” said Winson Phoon, head of fixed‑income research at Maybank Securities in Singapore.
The curve has “bear-steepened in recent weeks,” weighed down by supply, including the auctions of the 20-and 30-year bonds, caution over Treasury duration, as well as the risk of policy rate normalisation, he added.
Malaysia’s economy grew faster than initially estimated in the second quarter, data released mid-August showed, fuelling expectations of a rate hike.
Ringgit swaps almost fully priced in a 25-basis-point increase by the central bank over the next 12 months just days after the release of the data.
A boom in semiconductor exports tied to the artificial intelligence boom, and strong domestic demand, have helped the economy counter the impact of the war in the Middle East. Bank Negara Malaysia has left its benchmark rate unchanged since cutting it to 2.75% over a year ago.
The 16-basis point jump in Malaysia’s 10-year yield compares with an average decline of about 10 basis points in yields on similar-dated bonds for Indonesia, Thailand, the Philippines and Singapore, according to data compiled by Bloomberg.
The 26-basis point gap is the widest since at least January 2020.
Fesa Wibawa, an investment manager at Aberdeen Group, said he sees “the recent selloff mainly as a supply, positioning and relative-value adjustment, rather than a significant reassessment of Malaysia’s outlook”. — Bloomberg