BPA Malaysia Weekly Bond Market Report

Trading activities in the local bond market continued to gain momentum in the first full trading week of 2019 amid a robust 10-year GII bond auction.

Buying interest in long-dated government papers helped push MGS yields at the long end of the curve slightly lower by 1bps to 2bps.

On that account, the Thomson Reuters BPAM All Bond Index climbed marginally by 0.186 per cent to 163.117 points from 162.814 points in the prior week.

US Treasury yields surged across the board at the end of last week following last Friday’s release of bullish US jobs report which provided signs of a healthy economy.

According to the jobs report, total nonfarm payroll employment rose by 312,000 in December, surpassing consensus estimate for a 179,000 increase.

Wage growth also came in higher than expected with a 3.2 per cent increase from the previous year.

At the start of the week, Treasury yields extended their recent gains as risk sentiment had initially improved due to the growing optimism surrounding the latest round of trade talks between the US and China which had commenced on Monday.

However, Treasury yields fell towards the end of the week after the US-China three-day talk concluded without any major breakthrough.

The release of dovish minutes from the Federal Open Market Committee (FOMC) on Wednesday also contributed to the fall in Treasury yields as it revealed that the Fed has decided to adopt a patient approach to future rate hikes.

Top 10 most active bonds:

The top 10 most active bonds collected a total trading volume of about RM13.3 billion, which is significantly higher compared to RM7.9 billion garnered last week.

The previous 10-year benchmark GII (now turned off-the-run) maturing on October 31, 2028 led the pack with a total trading volume of RM2.4 billion.

Sovereign Auction(s):

On January 4, BNM announced the tender details for the new 10-year benchmark GII maturing on 9 July 2029.

The first government bond tender for this year closed on 8 January 2019 with a very strong bid-to-cover ratio of 4.067 times.

The highest, average and lowest yields came in at 4.135 per cent, 4.130 per cent and 4.110 per cent respectively.

The new 10-year benchmark GII was issued on 9 January 2019 with an issuance size of RM5 billion.

On January 10, BNM announced the tender details for the new seven-year benchmark MGS maturing on July 15, 2026 with an issuance size of RM3.5 billion.

The tender will be closed on January 14, 2019, and the new seven-year benchmark MGS will be issued on January 15, 2019.

An additional RM500 million had been marked for private placement.

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