Government Debt Trend and Flows
▪ MGS and GII yields mostly increased last week, moving between -1.4bps to 3.7bps overall. The 10Y MGS yield rose by 3.7bps to 3.962%, a 2-week high.
▪ Domestic yields jumped at the beginning of the week, in reaction to a surge in US Treasury yields the prior Friday. However, yields remained steady for the rest of the week as investors awaited US inflation numbers and Malaysia’s 2Q22 GDP data. Meanwhile, foreign investors continued to sell local bonds in July (-RM3.5b; Jun: -RM4.1b), although net outflows were slightly smaller.
▪ We expect local yields to trend rangebound-to-lower this week, following Malaysia’s stronger-than-expected 2Q22 GDP growth of 8.9% (1Q22: 5.0%), and as global markets continue to digest the cooler US inflation data.
▪ Foreign demand for domestic bonds will likely remain moderately pressured in August, amid lingering global risk aversion, a hawkish US Fed, and the scheduled maturity of RM8.6b worth of MGS. However, we expect a smaller net outflow than in July as US recession fears ease.
Auction Result (12-August)
▪ The 20Y GII 9/41 reopened at a slightly larger-than-expected RM5.5b, of which RM2.5b was privately placed, and was awarded at an average yield of 4.410%.
▪ Demand for longer-tenure bonds remained strong, as the auction recorded a bid-to-cover (BTC) ratio of 2.742x, above the YTD average of 2.352x.
▪ The next auction is a reopening of the 15Y MGS 4/37, and we estimate an issuance of RM5.0b including private placement.
Source: Kenanga Research - 15 Aug 2022
Created by kiasutrader | Apr 09, 2024
Created by kiasutrader | Apr 09, 2024