Foreign investors remained net purchasers of Malaysian bonds for the sixth successive month in June 2023, a surprising show of resilience after the US Federal Reserve (Fed) left interest rates unchanged, while hinting at upward revisions to come, said RAM Rating Services Bhd (RAM Ratings).
The credit rating agency said the overall foreign funds inflow accelerated further to RM5.2 billion (May: RM3.0 billion), led by the Malaysian Government Securities (MGS) and Islamic Malaysian Government Issues (GII).
Tracking the US Treasury yields, MGS yields largely trended upwards last month, amid expectation of more US rate hikes, it said in a statement on Thursday (July 20).
The 10-year MGS and US Treasury yields respectively climbed 13.8 basis points (bps) and 17.0 bps month-on-month (m-o-m) to 3.88% and 3.81% as of end-June.
“That sentiment, however, seems to have reversed in the first half of July, amid fresh hopes that the Fed may end rate hikes sooner than expected.
“This came on the heels of an encouraging moderation in the US inflation rate in June to 3% last week, the lowest since March 2021,” the agency said.
The 10-year MGS yield fell to 3.81% as of July 17, while the ringgit appreciated to 4.56 against the US dollar from 4.68 at end-June.
“With the Fed nearing the end of its rate hike cycle, we expect market sentiment to improve through the rest of this year,” it added.
