Early this week, some slight increase in government securities yields were seen as the recently released better-than-expected for the second quarter of 2014 (2Q14) gross domestic product (GDP) data sparked fears that the central bank may hike the benchmark interest rate (OPR) in the Monetary Policy Committee meeting next month. However, investors’ concerns were alleviated with the announcement of a lower-than-expected CPI data during mid-week and government securities yields eased slightly in the following days. As a result, the TR BPAM All Bond Index ended the week 0.04 per cent higher than the previous week with a reading of 135.83.
On Wednesday, the CPI data released by the Department of Statistics, Malaysia showed that the inflation rate slowed to 3.2 per cent year-on-year (y-o-y) from 3.3 per cent a month earlier. The CPI data also came in just marginally lower than economists’ expectations, who mostly expected the inflation rate to stay pat from last month. With the hike in the benchmark interest rate to 3.25 per cent last month by the central bank and the latest CPI number, the real interest rate has once again returned to positive territory.
With all ears and eyes fixed on the mid-week CPI data release, ringgit bond market players were sidelined for most of the week. Therefore, the total trade volume registered by the top ten most actively traded bonds declined by almost half the trade volume registered last week to RM9.24 billion. Most of the trading volume for the top ten most active bonds was contributed by the short term Bank Negara Monetary Notes. The SPK maturing in February 2024, which was re-opened for tender this week, saw RM980 million worth of bonds changed hands.
On August 19, 2014, the Government of Malaysia announced the re-opening tender for RM1 billion worth of the 10-year Sukuk Perumahaan Kerajaan (SPK) maturing on February 21, 2024. The lowest, average and highest yields were 4.266, 4.268 and 4.28 per cent respectively. An additional RM500 million worth of the SPK was privately placed.
Sabah Development Bank Bhd issued three tranches of five-year Medium Term Notes (MTNs” during the week. The new bonds, with an issuance amount of RM300 million, RM120 million and RM200 million were issued on August 18, 19 and 21, 2014 respectively. The MTNs, which offer a coupon rate of 4.78 per cent, are rated AA1 by RAM Ratings.