Government Debt Trend and Flows

▪ MGS and GII yield movements were mixed this week, ranging between -12.7 bps to 2.3 bps overall. The 10Y MGS yield rose marginally by 0.3 bps to 4.059%, while the 3Y MGS yield plunged by 12.7 bps to 3.616%.

▪ Local bonds remained mostly well bid this week despite a lack of domestic catalysts, likely steered by falling global bond yields. Meanwhile, foreign selling of domestic bonds eased in November (-RM1.0b; Oct: - RM6.3b) on the back of improved political stability and expectations of a less hawkish Fed.

▪ Yields may trend rangebound next week, driven by potential volatility in US Treasuries amid the final US FOMC meeting (Dec 13 – 14) of the year.

▪ Foreign demand for Malaysian bonds may continue to improve in the near-term, buoyed by the new government and easing of political uncertainty. However, the local debt market may still record mild foreign outflows in 1Q23 as the US Fed continues to raise interest rates and global risk sentiment remains tepid.

Auction Results (Dec-7)

▪ The 10Y MGS 7/32 reopened at an expected RM4.5b, with no private placement, and was awarded at an average yield off 4.063%.

▪ Demand was relatively weak, registering a bid-tocover ratio of 1.707x amid volatile global yield movements and cautious market sentiment ahead of the upcoming US FOMC meeting.

▪ The final auction of the year is a reopening of the 3Y GII 10/25 and we estimate an issuance of RM5.0b with no private placement.

Source: Kenanga Research - 9 Dec 2022