BPA Malaysia Weekly Bond Market Report

The meeting between US President Donald Trump and China’s President Xi Jinping at the G20 summit talk had been one of the main highlights earlier this week.

President Trump agreed not to raise tariffs on US$200 billion worth of Chinese imports in January next year as previously announced and there will be a 90-day period for both countries to achieve a deal.

The global market was on risk-on mode at the beginning of the week as a result of a temporary relief rally owing to the trade truce.

However, risk-on sentiment subsided during the middle of the week as concerns over US-China trade relations re-emerged and whether any solid action plans can be achieved by the two parties within the said 90-day truce.

Apart from that, the US Treasury yield curve saw inversion for the first time in a decade on the two-year and five-year tenor points, which could possibly signal recession in the near future.

Over to the local bond market, the MGS yield curve ended the week lower across the board, with yields in the seven-year to 10-year region shed up to five bps.

As such, the Thomson Reuters BPAM All Bond Index gained 0.167 per cent to close at 161.780 points from 161.511 points last week.

Meanwhile, the ringgit strengthened to 4.166 against the greenback on Friday from 4.188 a week ago.

On December 5, the Department of Statistics Malaysia (DOSM) reported Malaysia’s exports grew by 17.7 per cent year-on-year in October 2018 to RM96.4 billion, higher than consensus’ expectations. On the other hand, imports rose by 11.4 per cent year-on-year to RM80.1 billion.

As a result, trade surplus was recorded at RM 16.3 billion.

On December 7, it was reported that BNM international reserves amounted to US$102.0 billion as at November 30.

The reserves position is sufficient to finance 7.5 months of retained imports and is one-fold the short-term external debt.

The total traded amount of the top 10 most active bonds increased to RM9 billion from RM8.8 billion in the prior week.

The 10-year benchmark GII maturing on October 31, 2028 topped the list with RM1.5 billion changed hands.

On December 4, BNM announced the tender details for the reopening of the 20-year benchmark GII maturing on August 4, 2037 with an issuance size of RM2 billion and another RM2.5 billion to be privately placed.

The tender closed on December 6, with a decent bid-to-cover ratio of 2.307 times. The auction recorded the highest, average and lowest yields at 4.798, 4.787 and 4.765 per cent respectively.

On December 3, Perbadanan Kemajuan Negeri Selangor issued a four-year sukuk with issuance size of RM70 million that carries a profit rate of five per cent.

The sukuk is rated AA3 with a stable outlook by RAM Ratings.

On December 4, Prasarana Malaysia Bhd issued five tranches of Islamic Medium Term Notes (IMTN) amounted to RM2 billion with tenures ranging from 3-year to 20-year with profit rates ranging from 3.94 to 5.02 per cent.

The ITMNs are guaranteed by the Government of Malaysia.

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