Government Debt Trend and Flows

▪ MGS and GII yield movements were mixed last week, moving between -13.8bps to 5.5bps overall. The 10Y MGS yieldinitially fell by 1.2bps to 3.887% on Aug 2, before closing the week at 3.925% (+2.6bps).

▪ MGS and GII continued to see safe-haven demand early in the week, on the back of lower global bond yields and amid concerns surrounding geopolitical tensions between the US and China. However,demand began to ease by midweekas hawkish comments from Fed officials led to rising US Treasury yields.

▪ Domestic yields will likely rise this week, partly tracking the recent surge in US Treasury yields. This comes after US recession fears were dispelled following the far better-thanexpected jobs report for July. However, this uptrend may be capped by a potentially strong domestic 2Q22 GDP growth reading (Aug 12).

▪ We expect foreign demand for domestic bonds to remain generally pressured in August, amid global risk-off sentiment as recession concerns may linger and on renewed US-China tensions.

Source: Kenanga Research - 8 Aug 2022