KUALA LUMPUR: RAM Rating Services Bhd (RAM Ratings) expects the ringgit bond market to maintain its momentum this year on the back of falling interest rates globally.
The rating agency said the timing of the United States (US) Federal Reserve’s (Fed) pivot will still take centre stage in driving funds flow.
“Given the recent hawkish tone by several Fed officials and strong US data releases, financial market volatility might persist in the near term.
“Nonetheless, we expect the ringgit bond market to continue to chart a net fund inflow overall this year on the back of falling interest rates globally,” it said in a statement today.
In terms of funds flow, foreign participation in the bond market increased markedly last year, with an overall net inflow totalling RM23.6 billion, reversing from a net outflow of RM9.8 billion in 2022.
RAM Ratings attributed this to improved investor sentiment on the possibility of US rates having peaked and rate cuts heading into 2024.
Meanwhile, the rating agency also expects the corporate bond/sukuk financing to remain healthy with a pipeline of RM110 billion-RM120 billion in 2024, driven by private refinancing initiatives, continued infrastructure financing needs and financial institutions’ capital augmentation plans.
“Corporate ringgit bond issuance grossed RM118.3 billion in 2023, in line with the 2017-2021 average of RM116.4 billion.
“Key sectors that led issuance were financial (RM44.4 billion) and energy and utilities (RM21.1 billion),” it said.
As for Malaysian Treasury Bills (MTB) and Malaysian Government Securities (MGS), RAM Ratings anticipates MGS and GII issuance to moderate slightly to circa RM170.0 billion-RM180.0 billion, underscored by the government’s smaller deficit financing requirement.
In 2023, gross issuance of MGS and GII rose to RM190.9 billion compared to 2022’s RM171.5 billion, the largest supply on record.