The share prices of Malaysian banks have failed to catch up with higher bond yields. The relative performance of the Bursa Malaysia Finance Index broke away from its tight relationship with Malaysia 10 Years Bond yields

Share prices of banks, which track the bond yield closely most of the time, are not catching up since March 2022, suggesting that fears are starting to grow in the banking industry.

A fall in loan demand and the potential for defaults from borrowers would be bad news for bank earnings.

Some investors seem to be warming to the idea that bond yields have peaked in the US, removing a catalyst for bank stocks to close the gap. That suggests a couple of months of choppy trading lies ahead for the banking shares, which are also the major component of KLCI, the country stock index until investors get a better sense of the global economic outlook.