KUALA LUMPUR, July 18 — Domestic yields may trend rangebound-to-lower this week, as sustained safe-haven demand for bonds interspersed with profit-taking, said Kenanga Investment Bank Bhd (Kenanga).
Foreign demand for local bonds would likely remain pressured in July, as the hotter-than-expected United States (US) Consumer Price Index print guarantees at least another 75 basis points (bps) rate hike by the US Federal Reserves (Fed), it said.
It noted that global risk-off sentiment persists on growing recession concerns, while RM19.0 billion worth of domestic bonds are scheduled to mature this month.
“Demand for domestic bonds remained solid last week, as global bond yields continued to fall and the 10-year (10Y) Government Investment Issue (GII) auction saw very strong bids,” it said in a research note today.
It noted that the Malaysian Government Securities (MGS) and GII yields mostly declined last week, moving between 9.6 bps to 1.2 bps overall.
The 10Y MGS fell by 9.6 bps to a three-month low of 4.05 per cent, while the 3Y MGS yield increased by 1.2bps to 3.48 per cent.
Meanwhile, Kenanga said the ringgit continued to weaken against the US dollar last week to near the RM4.45 level, as the dollar was bolstered by expectations of more aggressive Fed rate hikes going forward.
“This week, the ringgit may shed some of its recent losses as the market pulls back from expectations of a 100bps Fed hike and the European Central Bank possibly starting its own aggressive tightening cycle.
“Likewise, our technical model suggests the local currency may reverse its recent weakness by 0.2 per cent to RM4.44 against the USD,” it added. — Bernama
