BPA Malaysia Weekly Bond Market Report

The local bond market began the week on a quiet note as many investors had their eyes set on the major one-day conference hosted by the Ministry of Finance and a few local banks entitled ‘Malaysia: A New Dawn’ held on Tuesday.

However, trading momentum picked up slightly towards the end of the week as volatility kicked in due to global sell-off in the equity market.

MGS yields were mostly higher compared to last week, with the long-dated MGS increasing by a range of about three bps to eight bps. Despite the higher yields on MGS, the Thomson Reuters BPAM All Bond Index increased slightly by 0.03 per cent to 160.770 points from 160.722 points in the previous week.

US Treasury yields hit multi-year highs at the end of last week, right after the release of US nonfarm payroll (NFP) data last Friday indicated that the Fed is very likely to stick to its gradual rate hike trajectory.

According to the jobs report, total nonfarm payroll employment rose by 134,000 in September, which is much lower than consensus estimates of 185,000.

Although September nonfarm payrolls number came in much weaker than expected, the figures for July and August were revised upwards from 147,000 to 165,000 and from 201,000 to 270,000 respectively. In addition, unemployment rate declined to 3.7 per cent in September, the lowest level since 1969.

On Wednesday, the yields on long-dated US Treasury notes were pushed higher after two key bond auctions saw weak demand, reflecting diminished appetite for US Treasuries. However, most of the gains in Treasury yields were pared towards the end of the week as a result of the biggest sell-off in global equities since February, as investors sought the safety of US Treasuries.

The total traded amount of the top 10 most active bonds increased by about 15 per cent to RM6.5 billion from RM5.7 billion in the prior week.

The off-the-run MGS maturing on October 31, 2019 topped the list with a total traded amount of RM1.8 billion.

On October 10, 2018, BNM announced the tender details for the reopening of the 20-year benchmark MGS maturing on June 8, 2038.

The tender closed on October 12, 2018 and garnered a decent bid-to-cover ratio of 1.657 times.

On October 8, 2018, Cagamas Bhd issued a three-year Medium Term Notes (MTN) with an issue size of RM800 million.

The three-year MTN carries a coupon rate of 4.1 per cent, and is rated AAA with a stable outlook by MARC and RAM Ratings.

On October 9, 2018, Cagamas Bhd issued a three-year Islamic Medium Term Notes (IMTN) with an issue size of RM750 million.

The IMTN carries a profit rate of 4.08 per cent, and is rated AAA by RAM Ratings and AAAIS by MARC with stable outlook respectively.

On the same day, Malayan Banking Bhd issued a one-year discount bond with an issue size of RM50 million.

The discount bond is rated AAA with a stable outlook by RAM Ratings. On October 11, 2018, MARC affirmed its AA-IS rating on Quantum Solar Park (Semenanjung) Sdn Bhd’s RM1 billion Green SRI Sukuk.

Concurrently, the rating outlook has been revised to negative from stable.

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