Malaysian Government Securities (MGS) and Government Investment Issues (GII) yields decreased across all tenures this week, falling between 3.2 and 9.8 basis points (bps). The 10-year MGS yield dropped by 4.1 bps to 3.671%, while the 10-year GII yield fell by 4.2 bps to 3.679%.
Kenanga IB noted that the decline in Malaysian bond yields, led by a 9.8 bps decrease in the 3-year GII yield, was fueled by growing expectations of an interest rate cut by Bank Negara Malaysia due to rising global trade tensions. Domestic bonds were also supported by Malaysia's relative resilience within the ASEAN region, strengthened by progress in regional trade, including closer ties with Indonesia and the UK, and the recent upgrade of the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA). The momentum of the Johor-Singapore Special Economic Zone (JS-SEZ) further bolstered the positive outlook.
Yields are expected to continue their downward trend next week, pending key US macroeconomic data. Lingering concerns about US growth prospects could intensify expectations of further rate cuts by the Federal Reserve, driving investment flows into stable emerging markets like Malaysia. Currently, Malaysia's macroeconomic outlook remains attractive enough to sustain investor demand.
