MALAYSIA’S 10-year bonds headed for the biggest monthly increase since 2008 as global financial turmoil and slowing economic growth boosted demand for the relative safety of government debt.
The yield on the 2024 notes fell 29 basis points, or 0.29 percentage point, in January to 3.86 per cent as of 9:50 am in Kuala Lumpur, data compiled by Bloomberg show.
While Malaysian bonds offer a premium over debt in the US, Japan and the euro area, the ringgit slumped this month as the collapse in crude prices crimped revenue for the oil-exporting nation.
“Some funds are buying bonds to hedge against the weaker economic prospects,” said Nik Mukharriz Muhammad, a Kuala Lumpur-based fixed-income analyst at CIMB Investment Bank Bhd.
“Malaysian yields are also much more attractive.”
Prime Minister Datuk Seri Najib Razak this month cut the nation’s growth target to 4.5 per cent to 5.5 per cent, from as much as six per cent, and also revised the budget deficit estimate higher.
Currency reserves have fallen to the lowest level since 2011 on speculation the central bank was trying to stem losses in the ringgit, which at 3.6 per cent in January makes it the worst-performing Asian currency. Oil-related industries account for a third of Malaysian state revenue.
The government raised its 2015 fiscal deficit target to 3.2 per cent of gross domestic product from three per cent amid a 56 per cent slump in Brent crude since June.
The ringgit fell 0.7 per cent this week to 3.6258 a dollar in Kuala Lumpur, data compiled by Bloomberg show. The currency’s monthly loss was the biggest since September and it declined to a more than five-year low of 3.6375 on Jan 29. — Bloomberg