Weaker Foreign Participation In Bond Market In January - RAM

KUALA LUMPUR, Feb 20 (Bernama) -- Foreign participation in Malaysia’s bond market was weaker in January following a consistent trend through the last few months amid lingering global trade and geopolitical uncertainties. RAM Rating Services Bhd (RAM Ratings) said foreign holdings of Malaysian bonds declined RM2.3 billion in January this year, the third consecutive month of outflows that followed a sell-off for both short- and long-term government securities and corporate bonds. However, the rating agency said the US Federal Reserve’s (Fed) shift to a more dovish tone in its monetary policy statement released in late January should support investor appetite for Malaysian and emerging market bonds in general. “The Fed has expressed that it will be more ‘patient’ in future policy decisions, which contrasts against its earlier message of ‘further gradual increases’. “In response to this, the benchmark 10-year Malaysian Government Securities (MGS) yield took a dive earlier this month, falling below the psychological level of four per cent on Feb 13,” it said. On the domestic front, RAM Ratings said private sector issuance was relatively robust in January, with RM5.8 billion of gross issuance value. For the quasi-government segment, January remained quiet with issuance value of RM100 million, as observed in the last few years, further dampened by the bumped up issuance in the fourth quarter of 2018. “We expected this relatively muted trend to persist through the rest of this year, primarily due to the government’s project-rationalisation initiatives and the lengthening of project timelines, which should constrain new debt-raising initiatives,” said the head of research Kristina Fong. Meanwhile, RAM Ratings said appetite for government bonds was also very healthy in January, as indicated by the bid-to-cover (BTC) ratios. “Both the 10-year Government Investment Issues (GII) and seven-year MGS achieved very strong BTC ratios of 4.13 and 3.91 times, respectively. “The BTC ratio for the slightly larger 5-year GII came in at 1.97 times. Government issuance summed up to RM13.0 billion for January this year, compared to RM10.5 billion in January 2018,” it added. -- BERNAMA