The ringgit strengthened 0.3 percent to 3.9598 per dollar, a fourth day of gains.
KUALA LUMPUR: Malaysian bonds rose for a second day and the three-year yield dropped to its lowest level since 2013 after the central bank unexpectedly cut interest rates on Wednesday.
Bank Negara Malaysia reduced the overnight rate to 3 percent, the first policy shift since it tightened in 2014. Only Goldman Sachs Group Inc. forecast the move among economists in a Bloomberg survey.
The central bank cited downside risks from the U.K. vote to leave the European Union and revised the floor for its base rate lower, suggesting room for more cuts.
South Korea left its key rate unchanged on Thursday, after slashing it to a record in June.
“The speculation of further easing has played a part,” said Eugene Leow, a Singapore-based fixed-income strategist at DBS Bank Ltd.
“However, note that the global hunt for yield is still in play.”
The three-year bond yield fell eight basis points to 2.89 percent as of 12:10 p.m. in Kuala Lumpur, the lowest for a benchmark of that maturity since May 2013, according to prices from Bursa Malaysia.
Flows into emerging-market debt funds set a new weekly record for the period ended July 6, according to EPFR Global data, on concern developed economies will take a hit after Britain voted to exit the EU, forcing the Federal Reserve to delay interest rate increases.
Foreign ownership of Malaysian sovereign bonds climbed to a record 204 billion ringgit ($52 billion) in June.
Bond auction
Bank Negara reduced the base for the benchmark rate to 2.75 percent on Wednesday and lowered 2016's projection for inflation to 2 percent to 3 percent, from as much as 3.5 percent.
Consumer prices climbed 2 percent in May from a year earlier, down from a seven-year high reached in February.
The yield on Malaysian bonds due in 2021 declined three basis points to 3.21 percent, the lowest since June 2013.
The ringgit strengthened 0.3 percent to 3.9598 per dollar, a fourth day of gains, according to prices from local banks compiled by Bloomberg. It reached 3.9548, the strongest since May 4.
Malaysia sold 2.5 billion ringgit of notes maturing in 2031 on Thursday and got bids for 2.2 times the amount on offer. - Bloomberg
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