Growing rate cut bets reignite foreign investor interest in govt bonds – RAM Ratings

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KUALA LUMPUR: RAM Rating Services Bhd’s (RAM Ratings) Bond Market Monthly December 2023 has highlighted that foreign investors turned net purchasers in November after three successive months of net selling.


The overall net foreign inflow amounted to RM5.4 billion (October: net outflow of RM2.6 billion), led by Malaysian Government Securities (MGS) and Government Investment Issues (GII) amounting to RM5.6 billion.

It said the rebound in investor appetite for emerging market bonds was fuelled by growing bets that major global central banks would cut rates in the first half of next year.

The market-assigned probability of a rate cut at the March 2024 Federal Market Open Committee meeting rose to about 43 per cent as of end-November 2023, up from around eight per cent a month earlier, according to CME FedWatch Tool data.

RAM Ratings said the better investor sentiment triggered a rally in regional bond markets, tracking price gains in the United States Treasury (UST) market.

The 10-year UST yield plunged 51.0 basis points (bps) month-on-month (m-o-m) to 4.37 per cent as of end-November.


To a milder extent, the 10-year MGS, Indonesia government bond and Thailand government bond yields were down m-o-m by 28.3 bps, 44.6 bps and 27.5 bps respectively, at 3.82 per cent, 6.75 per cent and 2.97 per cent on the same date.

Bond yields largely trended further downwards in early December, albeit at a more moderate pace, as traders appeared to have tempered their rate cut bets.

The 10-year UST and MGS yields stood at a respective 4.20 per cent and 3.80 per cent as of Dec 12.

Meanwhile, the ringgit trended around 4.67 against the greenback in early December after appreciating to 4.65 as at end-November (end-October: 4.77) on the back of a weakening US dollar.
– Bernama

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