MALAYSIA’S 10-year government bonds were poised for the biggest weekly gain since May 2013 on speculation Prime Minister Najib Razak will revise the state budget amid a plunge in oil prices.
Najib will hold a briefing on economic developments and the country’s financial position on January 20, according to a Finance Ministry statement this week.
The ringgit has fallen 10.6 per cent in the past six months, the worst performance in Asia after the yen, as the slump in Brent crude threatens to hurt government efforts to cut the fiscal deficit in the oil-exporting nation.
The yield premium on Malaysia’s debt over US bonds also supported demand.
“The news that Najib will be addressing the concerns has given some comfort to the market,” said Wong Chee Seng, a foreign-exchange strategist at AmBank Group in Kuala Lumpur.
“Local debt is also looking attractive, especially now that U.S. Treasuries have dropped below two per cent.”
The yield on Malaysia’s 2024 sovereign notes declined 22 basis points, or 0.22 percentage point, to 3.93 per cent from January 9 in Kuala Lumpur, according to data compiled by Bloomberg. That’s the lowest level since December 4. Similar-maturity US debt offers 1.72 per cent.
The ringgit depreciated 0.3 per cent yesterday and 0.2 per cent for the week to 3.5682 a dollar in Kuala Lumpur, data compiled by Bloomberg show.
The currency fell to 3.6045 on January 14, the lowest level since April 2009. The US currency may face selling pressure at 3.60, Wong said.
Oil-related industries account for a third of Malaysian state revenue and the 58 per cent slump in Brent from its peak in June is threatening to crimp earnings.
The government, which has run a budget deficit since 1998, is seeking to trim the gap to three per cent of gross domestic product this year from 3.5 per cent. — Bloomberg