Local Yields May Trade Lower On US Optimism
Yields on Malaysian government bonds closed mixed this week, with cautious optimism around global trade and soft US economic data helping to anchor the local fixed-income market.
According to Kenanga Research, yields on Malaysian Government Securities (MGS) and Government Investment Issues (GII) moved within a narrow range of -4.2 to +0.9 basis points (bps) across the curve. The benchmark 10-year MGS yield eased 1.6 bps to 3.518%
The 10-year GII dipped 0.2 bps to 3.532%
Global and Domestic Drivers
The slight decline in long-term yields closely followed movements in US Treasuries, which reacted to positive signals in US-China trade negotiations. The improved trade outlook, combined with softer US economic data, has reinforced expectations of an earlier rate cut by the US Federal Reserve.
On the domestic front, a modest improvement in Malaysia's Purchasing Managers' Index (PMI) and continued export growth to African markets have supported confidence in local bonds, contributing to the relatively stable yield environment.
Outlook: Stable Yields with Eyes on US Inflation
Kenanga expects local bond yields to remain stable in the near term, with upcoming economic data — including industrial production, retail sales, and labour market statistics — likely to guide investor sentiment.
However, the research house cautioned that any upside surprise in US inflation data could prompt global bond yields to rise, potentially spilling over into the Malaysian market. Additionally, renewed uncertainty in US tariff policy could reintroduce volatility.
'Investors should stay alert to both domestic data and global developments, especially updates on tariff talks,' Kenanga stated. Related
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